White House releases first-ever digital-asset framework

Following President Biden’s executive order, a 6-month investigation into digital-assets has culminated in the first-ever comprehensive framework to help govern digital-assets such as CBDCs and cryptocurrencies.

According to a White House Fact Sheet released today, the digital-assets market has grown “significantly” in recent years. 16% of Americans have bought cryptocurrencies, and millions of investors across the world are now using them.

Biden’s executive order of March this year instructed various government agencies to research into digital-assets and to construct reports on frameworks and policy recommendations.

Nine reports were submitted and they were said in the White House Fact Sheet to “articulate a clear framework for responsible digital asset development and pave the way for further action at home and abroad.”

While recognising that central bank digital currencies (CBDCs) did have associated risks, the reports “encouraged” the Federal Reserve to continue its ongoing research in this field.

On the other hand, the reports recommended that the SEC and the CFTC:

“aggressively pursue investigations and enforcement actions against unlawful practices in the digital assets space.”

On the topic of protecting consumers, investors and businesses, it was reported that “non-compliance with applicable laws and regulations remains widespread,” and that “Outright fraud, scams, and theft in digital asset markets are on the rise”.

On financial stability concerns, the Fact Sheet referred to the TerraUSD stablecoin crash in May this year, and how ensuing insolvencies had resulted in the loss of around $6 billion in wealth.

In order to counter this, it was stated in the Fact Sheet that: 

“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.”

It also stated that it would collaborate with U.S. ally organisations such as the Organisation for Economic Cooperation and Development (OECD), and the Financial Stability Board (FSB) in order to identify, track and analyse the possible risks that digital-asset markets could produce.

Illicit finance in the digital-assets sector was highlighted as a problem and the Treasury has been tasked with compiling a finance risk assessment on DeFi, to be completed by February 2023.

Finally, a U.S. central bank digital currency (CBDC) was said to have the potential to bring a number of significant benefits. These included greater efficiencies, speed, financial inclusion, stability, and the safeguarding of private and sensitive data.

The only disadvantage of a CBDC mentioned, was that there might be “runs to CBDC in times of stress”.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.