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President Biden’s long-awaited Executive Order on digital asset policy has been released. The order outlines the main objectives with which to approach the space while organizing research and regulatory responsibilities among different federal bodies.
Notably, the White House also advocates “urgency” for R&D of a US CBDC, which over 100 countries are already exploring or piloting.
Concerns About Illicit Finance
As published by the White House, the order acknowledged the growing digital asset industry for presenting a wide array of both benefits and risks. While crypto may expand “affordable financial services” and reduce payment costs, the President claims it creates risks surrounding “illicit finance” and “national security”.
“The increased use of digital assets and digital asset exchanges and trading platforms may increase the risks of crimes such as fraud and theft, [and] other statutory and regulatory violations,” reads the order.
Worries over money laundering in crypto have long been echoed by Jerome Powell and Gary Gensler alike – especially around stablecoins. Besides their potential for pseudonymous transactions and finance, there is wide concern that the most popular stablecoin – Tether – is not backed by sufficient collateral.
Senator Elizabeth Warren has also been loud on crypto crime – particularly now regarding Russia’s conflict in Ukraine. She is concerned that the country may use cryptocurrencies to bypass western trade sanctions, and is pushing for foreign exchanges to not service targeted entities.
Given the complexity of the situation, the president laid out six policy priorities: consumer protection, financial stability, illicit finance, US financial leadership, financial inclusion, and “responsible innovation” (including reduction of climate impact caused by cryptocurrency mining).
The process for implementing the order will include over 20 different executive figures and agency representatives. These range from the Secretary of State to the Administrator of the Environmental Protection, and from the SEC to the CFTC.
These various agency heads and representatives will each be required to submit a research report to the President on some given aspect of the industry within 180 days.
One of the president’s requirements is for a report on the short and long-term effects of distributed ledger technology on climate change. It even encourages research into less energy-dependent consensus mechanisms and their various “design tradeoffs”.
Developing a CBDC
In section 4 of the order, the Biden administration places “the highest urgency” on crafting design and deployment options for a potential US CBDC. He wishes to assess risks/ benefits for consumers, and the actions required to launch a CBDC is deemed to be of national interest.
Biden said any digital dollar implementation must align with “democratic values” including privacy protection, appropriate transparency, and “architecture interoperability”. This includes interoperability with other national CBDCs, which would “help support the continued centrality of the United States within the international financial system”.
The president expects a report on the “future of money and payment systems” related to CBDCs within 180 days.
Response: Overstating the Issues?
The report seems to have been met well by the crypto market, with Bitcoin shooting back above $41,000 upon its release. However, Senator Cynthia Lummis – the Bitcoin supportive Wyoming Rep. – responded to the order today with criticism of Biden’s over-concerned approach.
“I think his executive order misses the fact that the overwhelming majority of digital asset users are law-abiding and trying to make our financial system better,” reads her statement.
Lummis also said that she remains “unconvinced” on the need for a CBDC in the United States. She is set to release her own thoughts on digital asset legislation soon.