White House Posts Framework for Development of Digital Assets: Protect Investors but Promote Responsible Innovation

After months of behind-the-scenes discussion, the White House revealed its “Fact Sheet” on the responsible development of digital assets or crypto-assets. The Executive Order issued by the White House last March sought to outline the administration’s approach, is now being expanded to be utilized as a guideline for greater clarity on policy and regulation. While the supportive language continues, there are now explicit directions for agencies to pursue.

While emphasizing the need to protect investors, as well as safeguarding the financial system, the Framework tells administration officials to adopt policies that promote “US leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation.”

the Framework tells administration officials to pursue policies that promote US leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation Click to Tweet

The Biden Administration stated:

Digital assets present potential opportunities to reinforce US leadership in the global financial system and remain at the technological frontier.”

This statement alone may challenge certain elected officials and other policymakers that have been overtly hostile to the evolving digital asset ecosystem.

If you are interested, the FACT SHEET:  White House Releases First-Ever Comprehensive Framework for Responsible Development of Digital Assets, may be downloaded here.

The work involved the collaboration of “stakeholders across government, industry, academia, and civil society.”

Importantly, the document promotes the concept of a Central Bank Digital Currency or CBDC while encouraging the US Federal Reserve to experiment and evaluate the potential of a digital dollar, requiring an interagency group, led by the US Department of Treasury, to further review a CBDC.

The Administration recognizes the potential for a digital dollar to “preserve U.S. global financial leadership” while fostering financial inclusion and lowering costs for consumers.  While a CBDC should “align with democratic values” the missing statement is the preservation of privacy – something most proponents believe is essential for a successful digital dollar – or perhaps – regulated stablecoins issued by private firms; another option that was not addressed.

This coming October, the Financial Stability Oversight Council (FSOC) is expected to publish a report discussing digital assets’ financial-stability risks, and identifying related regulatory gaps. This report will cover stablecoins – especially in light of the recent collapse of several erstwhile stablecoins that have harmed the entire concept.

The Biden Administration will chart a course on digital assets as follows:

  • Encourage regulators like the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC), consistent with their mandates, to aggressively pursue investigations and enforcement actions against unlawful practices in the digital assets space.
  • Encourage the Consumer Financial Protection Bureau (CFPB) and Federal Trade Commission (FTC), as appropriate, to redouble their efforts to monitor consumer complaints and to enforce against unfair, deceptive, or abusive practices.
  • Encourage agencies to issue guidance and rules to address current and emergent risks in the digital asset ecosystem. Regulatory and law enforcement agencies are also urged to collaborate to address acute digital assets risks facing consumers, investors, and businesses.  In addition, agencies are encouraged to share data on consumer complaints regarding digital assets—ensuring each agency’s activities are maximally effective.
  • The Financial Literacy Education Commission (FLEC) will lead public-awareness efforts to help consumers understand the risks involved with digital assets, identify common fraudulent practices, and learn how to report misconduct.
  • Agencies will encourage the adoption of instant payment systems, like FedNow, by supporting the development and use of innovative technologies by payment providers to increase access to instant payments, and using instant payment systems for their own transactions where appropriate – for example, in the context of distribution of disaster, emergency or other government-to-consumer payments.
  • The President will also consider agency recommendations to create a federal framework to regulate nonbank payment providers.
  • Agencies will prioritize efforts to improve the efficiency of cross-border payments by working to align global payments practices, regulations, and supervision protocols, while exploring new multilateral platforms that integrate instant payment systems.
  • The National Science Foundation (NSF) will back research in technical and socio-technical disciplines and behavioral economics to ensure that digital asset ecosystems are designed to be usable, inclusive, equitable, and accessible by all.

Additional steps by the Biden Administration include an all-hands strategy by federal agencies:

  • The Treasury will work with financial institutions to bolster their capacity to identify and mitigate cyber vulnerabilities by sharing information and promoting a wide range of data sets and analytical tools.
  • The Treasury will work with other agencies to identify, track, and analyze emerging strategic risks that relate to digital asset markets. It will also collaborate on identifying such risks with U.S. allies, including through international organizations like the Organization for Economic Co-operation and Development (OECD) and the Financial Stability Board (FSB).
  • The Office of Science and Technology Policy (OSTP) and NSF will develop a Digital Assets Research and Development Agenda to kickstart fundamental research on topics such as next-generation cryptography, transaction programmability, cybersecurity and privacy protections, and ways to mitigate the environmental impacts of digital assets. It will also continue to support research that translates technological breakthroughs into market-ready products. Additionally, NSF will back social-sciences and education research that develops methods of informing, educating, and training diverse groups of stakeholders on safe and responsible digital asset use.
  • The Treasury and financial regulators are encouraged to, as appropriate, provide innovative US firms developing new financial technologies with regulatory guidance, best-practices sharing, and technical assistance through things like tech sprints and Innovation Hours.
  • The Department of Energy, the Environmental Protection Agency, and other agencies will consider further tracking digital assets’ environmental impacts; developing performance standards as appropriate; and providing local authorities with the tools, resources, and expertise to mitigate environmental harms. Powering crypto-assets can take a large amount of electricity—which can emit greenhouse gases, strain electricity grids, and harm some local communities with noise and water pollution. Opportunities exist to align the development of digital assets with transitioning to a net-zero emissions economy and improving environmental justice.
  • The Department of Commerce will examine establishing a standing forum to convene federal agencies, industry, academics, and civil society to exchange knowledge and ideas that could inform federal regulation, standards, coordinating activities, technical assistance, and research support.

International engagement is part of the Framework, a sensible inclusion to the report, as digital assets tend toward being borderless, or simply decentralized, creating new challenges for policymakers.

  • U.S. agencies will leverage U.S. positions in international organizations to message U.S. values related to digital assets. U.S. agencies will also continue and expand their leadership roles on digital assets work at international organizations and standard-setting bodies—such as the G7, G20, OECD, FSB, Financial Action Task Force (FATF), and the International Organization for Standardization. Agencies will promote standards, regulations, and frameworks that reflect values like data privacy, free and efficient markets, financial stability, consumer protection, robust law enforcement, and environmental sustainability.
  • The State Department, the Department of Justice (DOJ), and other U.S. enforcement agencies will increase collaboration with—and assistance to—partner agencies in foreign countries through global enforcement bodies like the Egmont Group, bilateral information sharing, and capacity building.
  • The State Department, Treasury, USAID, and other agencies will explore further technical assistance to developing countries building out digital asset infrastructure and services. As appropriate, this assistance may include technical assistance on legal and regulatory frameworks, evidence-gathering and knowledge-sharing on the impacts, risks, and opportunities of digital assets.
  • The Department of Commerce will help cutting-edge U.S. financial technology and digital asset firms find a foothold in global markets for their products.

Fighting illicit activity within the crypto-sphere has always been on the table and it will remain foundational to the Administration’s approach. The government expects to monitor the development of crypto and assess and adjust when necessary. Battling bad actors will remain a priority.

So who wins? Digital asset innovators.

Simply the fact the Administration recognizes the benefits of crypto means the various Federal agencies must fall into line.  The White House “encourages” agencies to issue guidance and rules – the most glaring example of an agency unable to complete this task is the current leadership at the SEC, which is yet to acknowledge the unique qualities of programmable assets which may be securities, commodities, utilities or all of the above.

Agencies that do not embrace the acceptance of crypto, and elected officials that drag their feet in accepting innovation, may be sidelined. Or, they should be sidelined as they will be on the wrong side of innovation.


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