White House Executive Order on Digital Assets Aims to Promote Innovation While Mitigating Risk, Illicit Activity in Cryptocurrencies

As was widely anticipated, the White House has posted an Executive Order targeting digital assets and cryptocurrencies. In a statement the White House explained their goal:

“The rise in digital assets creates an opportunity to reinforce American leadership in the global financial system and at the technological frontier, but also has substantial implications for consumer protection, financial stability, national security, and climate risk. The United States must maintain technological leadership in this rapidly growing space, supporting innovation while mitigating the risks for consumers, businesses, the broader financial system, and the climate. And, it must play a leading role in international engagement and global governance of digital assets consistent with democratic values and U.S. global competitiveness.”

The Order outlines the following federal measures:

  • Protect U.S. Consumers, Investors, and Businesses by directing the Department of the Treasury and other agency partners to assess and develop policy recommendations to address the implications of the growing digital asset sector
  • Protect U.S. and Global Financial Stability and Mitigate Systemic Risk by encouraging the Financial Stability Oversight Council to identify and mitigate systemic risks
  • Mitigate the Illicit Finance and National Security Risks Posed by the Illicit Use of Digital Assets Promote U.S. Leadership in Technology and Economic Competitiveness to Reinforce U.S. Leadership in the Global Financial System while working with international partners
  • Promote U.S. Leadership in Technology and Economic Competitiveness to Reinforce U.S. Leadership in the Global Financial System. This framework will serve as a foundation for agencies and integrate this as a priority into their policy, research and development, and operational approaches to digital assets.
  • Promote Equitable Access to Safe and Affordable Financial Services by affirming the critical need for safe, affordable, and accessible financial services
  • Support Technological Advances and Ensure Responsible Development and Use of Digital Assets. The government is asked to take steps for responsible development while prioritizing privacy and security.
  • Explore a U.S. Central Bank Digital Currency (CBDC) by placing urgency on research and development of a potential United States CBDC, should issuance be deemed in the national interest.

The White House noted that crypto has experienced “explosive growth” topping $3 trillion from $14 billion in just five years. Around 16% of the population, or 40 million people, have invested in or utilized digital assets.

The administration also said that more than 100 countries are investigating CBDCs.

For industry supporters, it will be encouraging that the White House clearly stated that digital assets represent a significant opportunity for innovation within global financial services and it is important for the US to maintain its leadership position in innovation.

In a separate statement, NEC Director Brian Deese and National Security Advisor Jake Sullivan said the Order will help position the US to keep playing a leading role in digital asset innovation and governance in a way that protects consumers, which is consistent with our democratic values and advances U.S. global competitiveness.

“We are clear-eyed that “financial innovation” of the past has too often not benefited working families, while exacerbating inequality and increasing systemic financial risk. This history underscores the need to build robust consumer and economic protections into digital asset development.”

Congressman Patrick McHenry, the Ranking Republican on the House Financial Services Committee and consistent support of Fintech innovation, issued the following statement in response to the Executive Order:

“One thing that today’s action makes clear—Congress must legislate. We need bipartisan solutions developed through a thoughtful and transparent process that includes market participants—not anti-innovation policies. Members of the House Financial Services Committee on both sides of the aisle are already examining the issues and opportunities raised by digital assets. President Biden must work with us. As Congress contemplates regulatory frameworks for digital assets, we must also fully acknowledge their benefits—like the important role they have played in ushering aid to Ukrainians—and their underlying technologies, which is largely missing in this announcement. Despite some Democrats’ claims, we have not seen widespread evasion of our sanctions using digital assets by Russia, due to the transparent nature of blockchain technology. Any attempt to use the crisis in Ukraine as the rationale for today’s action is short-sighted and will not lead us to the right solutions that allow this technology to flourish in the U.S.”

The digital asset sector should issue a collective sigh of relief that the Order is not excessively prescriptive while acknowledging the benefits of crypto.

Meanwhile, SEC Chairman Gary Gensler, a key agency involved in implementing the Order, quickly tweeted his intention to focus on investor protection and illicit activity.

The Order arrives at a time when some officials worry that the technology will be utilized by Russia to evade stringent economic sanctions. Most industry followers understand that the cryptocurrency market is simply too small to directly aid the Russian government. Simultaneously, Russian elites may attempt to access financial services by utilizing digital asset services but insiders point to the transparent nature of crypto that will make this a  challenging task.



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