Movement from the White House on regulation of digital assets

By John Bassilios 

Earlier this year, we reported on an executive order signed by United States President Joe Biden setting out key policy objectives for managing digital assets. The White House recently released a fact sheet summarising the outcome of reports provided to the President in response to the executive order. Nine reports have been submitted to the President to date, with another report expected next month.

In light of the report’s submitted to date, the White House released a fact sheet on 16 September 2022 summarising the Administration’s plans to promote innovation and mitigate the risks of digital assets.

The fact sheet provides some broad statements, including that the Administration encourages, through various regulators and agencies:

• agressive pursuit of investigations and enforcement actions against unlawful practices in the digital assets space, including exposing and disrupting illicit actors and addressing the abuse of digital assets.
• a redoubling of efforts to monitor consumer complaints and enforce against unfair, deceptive or abusive practices.
• issuing regulatory guidance, best practices sharing and technical assistance, collaboration between agencies and data sharing on consumer complaints.
• public awareness efforts to help consumers understand the risks associated with digital assets and common fraudulent practices, as well as enhancing dialogue with the private sector to ensure that firms understand existing obligations and illicit financing risks associated with digital assets.
• adoption of instant payment systems to facilitate faster payments and make financial services more accessible.
• prioritising efforts to improve the efficiency of cross-border payments, through aligning global payment practices, regulations and supervision protocols and exploring new multilateral platforms.
• bolstering the Treasury’s capacity to identify and mitigate cyber vulnerabilities and identify, track and analyse emerging strategic risks relating to digital asset markets.
• backing research on topics such as next-generation cryptography, transaction programmability, cyber security, privacy protections and ways to mitigate the environmental impacts of digital assets.
• Treasury to complete an illicit finance risk assessment on decentralised finance by the end of February 2023 and an assessment on non-fungible tokens by July 2023.

The President will also consider recommendations to create a federal framework to regulate non-bank payment providers and evaluate whether to call upon Congress to amend laws (including the Bank Secrecy Act, anti-tip-off statutes and laws against unlicensed money transmitting) to explicitly apply to digital asset service providers.

The fact sheet touches on the implementation of a US Central Bank Digital Currency (CBDC, a digital form of the US dollar). While not committing to a US CBDC, the Administration has also developed policy objectives for a potential US CBDC system.

While this update from the White House is encouraging, it does not provide much in the way of certainty or specificity on the regulation of digital assets going forward.