Executive Order on Ensuring Responsible Development of Digital Assets

  • Source: whitehouse.gov

Treliant Takeaway:

Treliant knows digital and FinTech.  If your financial services company needs assistance with evaluating risk and risk management systems with respect to digital assets, we can help.

Executive Order Highlights:

On March 9, 2022, President Biden issued an Executive Order on Ensuring Responsible Development of Digital Assets (EO). The EO reveals key objectives of the Biden Administration’s policy with respect to digital assets to be:

  • Protection of consumers, investors, and businesses by ensuring safeguards are in place, providing sufficient oversight and standards, and promoting responsible development of digital assets;
  • Protection of United States and global financial stability and mitigation of systemic risk by implementing regulatory and supervisory requirements for digital asset issuers, exchanges, and trading platforms that are consistent with the standards that govern traditional market infrastructures and financial firms;
  • Mitigation of illicit finance and national security risks posed by misuse of digital assets in money laundering, cybercrime, ransomware, narcotics and human trafficking, and terrorism and proliferation finance through regulatory, governance, and technological measures while maintaining transparency, privacy, and security;
  • Reinforcement of national leadership in the global financial system and in technological and economic competitiveness through responsible development of payment innovations and digital assets;
  • Promotion of access to safe and affordable financial services, including cross-border money transfers; and
  • Support of technological advances that promote responsible development and use of digital assets. To ensure the digital asset and payment ecosystems are developed in a manner that includes privacy and security, avoids illicit exploitation, and reduces negative environmental impacts.

To ensure U.S. development of crypto assets in consistent with these policy objectives,  the EO directs the Assistant to the President for National Security Affairs (APNSA) and the Assistant to the President for Economic Policy (APEP) to coordinate an interagency effort involving numerous federal agencies, including the federal banking agencies as appropriate.

In addition, the EO summarizes Biden Administration policy with respect to a  Central Bank Digital Currency (CBDC). The Administration:

  • Places the highest urgency on research and development into the potential design and deployment of a United States CBDC;
  • See merit in showing U.S. leadership in international fora and multi-country conversations and pilots involving CBDC; and
  • Believes CBDC have potential to support efficient, low-cost transactions, especially cross-border transactions, and foster greater access to the financial system.

The EO orders the Secretary of the Treasury (SecTreas), in consultation with the Attorney General (AG), the Chair of the Board of Governors of the Federal Reserve System (Fed Chair), and the heads of other relevant federal agencies to research and report on CBDC. The SecTreas is to report on the future of money and payments systems, digital assets, and the implications of CBDC and private sector digital assets for national interests, economic growth and stability, the financial system, democracy, national security, financial crimes, human rights, financial inclusion, and the effects of foreign CBDCs on U.S. financial centrality and more generally. The Fed Chair will research and report on the potential impact of CBDC design on the efficiency of payments systems and monetary policy as a macroeconomic stabilization tool. The AG will report on whether legislative changes would be necessary to implement a U.S. CBDC.

The heads of several federal agencies are tasked with researching and reporting on  the implications of digital assets and associated changes in payments systems and financial markets for consumers, investors, and businesses; the technological risks of various CBDC designs; the impact of inclusion of digital assets in Federal processes; the role of law enforcement in detecting, investigating, and prosecuting criminal activity related to digital assets; the effect of digital assets on competition policy; and the extent to which existing privacy, consumer protection, and investor and market protection measures may be used to address the risks of digital assets. Other agencies are tasked with reporting on the impact of distributed ledger technology and digital assets on energy, the economy, the environment, including efforts to address climate change, financial crimes, national security, financial stability, and systemic risks.

This EO makes it clear that the Biden Administration is preparing for legislative, regulatory, and enforcement activities associated with digital assets. Those engaged in issuing, trading, exchanging, or investing in crypto assets should monitor these developments closely.

Author

Lynn Woosley

Lynn Woosley is a Senior Director with Treliant.  She is a seasoned executive with extensive risk management experience in regulatory compliance, consumer and commercial credit risk, credit and compliance risk modeling, model governance, regulatory change management, acquisition due diligence, and operational risk in both financial services and regulatory environments.