Today, President Biden signed an Executive Order addressing the risks and benefits of digital assets – including whether the United States should establish its own Central Bank Digital Currency (CBDC). “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,” said the Biden administration in a White House press release early this morning. The administration stressed that “[t]he 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 Executive Order represents the Biden administration’s first step toward regulating the cryptocurrency market, which the U.S. Securities and Exchange Commission’s chair Gary Gensler has compared to the wild west.
The Executive Order sets forth six key priorities for government oversight of cryptocurrencies: (i) consumer and investor protection; (ii) financial stability; (iii) mitigating illicit finance; (iv) U.S. leadership in the global financial system and economic competitiveness; (v) financial inclusion; and (iv) responsible innovation.
In particular, the Executive Order directs:
- the Department of Treasury and other federal agencies to study and recommend policies to address the implications of the growing digital asset sector and changes in financial markets, and to ensure sufficient oversight to protect U.S. consumers, investors, and businesses from any systemic financial risks posed by digital assets;
- the Financial Stability Oversight Council to identify any systemic financial risks posed by digital assets and develop policy recommendations to address any regulatory gaps;
- federal agencies to mitigate the financial and national security risks posed by the illicit use of digital assets and to ensure that American cryptocurrency laws align with those of U.S. allies and partners;
- the Department of Commerce to establish a framework to drive U.S. competitiveness and leadership in digital asset technologies;
- the Secretary of the Treasury to produce a report on the future of money and payment systems, including implications for economic growth, financial growth and inclusion, national security, and the extent to which technological innovation may influence that future;
- federal agencies to take concrete steps to study and support technological advances and ensure responsible development and use of digital assets; and
- the Federal Reserve to explore the legal and economic ramifications of establishing a U.S. Central Bank Digital Currency, also referred to as a “U.S. digital dollar.”
While the Executive Order is a first step towards additional rules and regulations for digital assets, it does not provide any concrete guidance. The Order, however, is likely to lead to additional regulation in the near future.
Authors: Kaela Dahan, Julia Nestor and Mark Bini