The White House published the first ever crypto framework focused on strengthening regulatory oversight of the digital asset market after studying the industry for about six months.
In a statement, the White House explained how various government agencies had joined forces to monitor the development of the digital asset market with a focus on seven key objectives.
- Safeguarding citizens and businesses
- Fostering access to financial services
- Fostering financial stability, encouraging innovation
- Upholding the nation’s position as a financial leader
- Combating financial crime
- Investigating the potential for a digital dollar (CBDC)
Safeguarding Citizens and businesses:
The White House mentioned cryptocurrency assets’ dangers, specifically price volatility and crypto fraud. The statement called for the aggressive pursuit of investigations and enforcement actions against unlawful acts in the digital assets field by the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC).
The Consumer Financial Protection Bureau and Federal Trade Commission were urged to crack down on unethical behavior by the report. It also stated that the Financial Literacy Education Commission would lead attempts to inform the public about the hazards associated with cryptocurrencies.
Fostering financial stability, encouraging innovation:
The statement also brought stablecoins to light by stating that there could be “spillover effects” and “disruptive runs” if digital assets and traditional financial services are combined.
It used Terra’s UST collapse as evidence of the “potential for instability.” In the days following UST’s collapse in May, Treasury Secretary Janet Yellen also addressed the topic, remarking that the experience demonstrated the necessity of stablecoin regulation.
The Treasury will cooperate with financial institutions to identify risks and vulnerabilities in an effort to support financial stability. It will also collaborate with other departments to study emerging strategic risks.
The White House stated that research on cryptography, transaction programmability, cybersecurity, privacy protection, and climate-friendly digital asset solutions would be carried out by the Office of Science and Technology Policy and NSF.
While the Department of Energy and the Environmental Protection Agency has been tasked with monitoring how cryptocurrency damages the environment, the government has encouraged the Treasury and other agencies to offer guidance and aid to US enterprises working on innovative financial technology.
Combating financial crime:
In order to debate how cryptocurrency should be regulated, the Department of Commerce will bring together federal agencies, academics, leading figures in the business, and other stakeholders.
The government will discuss values relating to digital assets with international organizations like the G7, G20, and the Financial Action Task Force, as the Treasury indicated in its most recent framework on international participation.
The State Department, Department of Justice, and Treasury will work more closely together with foreign authorities, according to the study, while USAID and other agencies will help establish the infrastructure and services for digital assets in developing nations.
The Administration has made it clear that it wants to stop all crypto-related crime, citing groups like Lazarus Group as using digital assets as an example. According to the statement, President Biden would consider changing the Bank Secrecy Act and other laws to directly impose regulations on suppliers of digital asset services, such as NFT platforms.
He will also think about asking Congress to alter the legislation to give the Department of Justice new authority to prosecute financial crimes anywhere and to toughen up the penalty for unlicensed money transmission.
The government will keep an eye on crime in the industry, according to the announcement, which also revealed that the Treasury would provide criminal risk assessment guides for both DeFi and NFTs in February 2023 and July 2023, respectively.
Investigating the potential for a digital dollar (CBDC) :
Additionally, the government is thinking of introducing its own Central Bank Digital Currency (CBDC). A digital dollar might provide “huge benefits,” such as increasing financial inclusion and economic expansion.
The government had created “Policy Objectives for a U.S. CBDC System,” which reflected its main aims for a prospective digital currency.
The statement included principles like safeguarding clients, fostering economic expansion, and upholding human rights, but it also stated that the Federal Reserve would need to carry out further research on CBDCs. Additionally, the Treasury will be in charge of a team that will examine the potential effects of a CBDC.
The White House statement is the most convincing evidence yet that the government intends to assist the development of digital assets in a safe and secure manner. These actions demonstrate that the US sees potential in crypto and blockchain technology, despite President Biden and the various regulators previously being reluctant towards the expansion of the crypto industry.