The Biden Administration recently provided a framework and insights as to how government regulation of crypto assets will be handled in the United States.
The framework follows an executive order issued by President Joe Biden in March, in which he directed federal agencies to investigate the benefits and risks of cryptocurrencies. In a fact sheet released early on Friday, the White House touched on a broad range of topics, including consumer protection, the environment, and national security. The statement went on to further detail endeavors to solidify the United States’ role as a global crypto frontrunner by actively encouraging innovation and global collaboration.
White House calls on SEC to aggressively pursue investigations.
One segment of the White House’s new crypto regulatory framework emphasizes eradicating illicit activity in the industry. The White House cites a 2018 Wall Street Journal article stating that “almost a quarter of digital coin offerings had disclosure or transparency problems.”
In efforts to combat illicit activity, the statement put out by the White House calls on agencies like the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) to “aggressively pursue investigations and enforcement actions against unlawful practices in the digital assets space.” and to “redouble their efforts to monitor consumer complaints and to enforce against unfair, deceptive, or abusive practices.”
According to CNBC, the president is also considering having Congress increase the penalties for unlicensed money transmission and possibly amending certain federal statutes. Such legislation would enable the Department of Justice to start prosecuting digital asset crimes in any jurisdiction.
Combating extreme volatility
In another section of the fact sheet focusing on the stability of assets, the White House referenced the TerraUSD crash in May that wiped $600 billion of wealth. The White House went on to say that stablecoins, in particular, could cause destructive spillover effects on the traditional finance sector if not met with regulation.
The White House further added that the Financial Stability Oversight Council (FSOC) will issue a report in October concerning the financial-stability risks of digital assets, identifying related regulatory shortfalls and making additional recommendations to promote financial stability.
In addition to FSOC activity, the US Treasury will collaborate with financial institutions to help determine and mitigate cyber vulnerabilities by collaborating information, data sets, and analytical tools. The FSOC will also collaborate with the Organization for Economic Co-operation and Development (OECD) and the Financial Stability Board (FSB) to identify, monitor, and analyze strategic risks in digital asset markets.
The White House on Innovation
The White House recognized that digital assets are becoming inseparable from traditional finance assets and further outlined steps it will take to drive an American digital asset industry, such as funding research into cryptography, cybersecurity, transaction programmability, and more.
The statement noted that traditional finance “leaves too many behind” and that 24 million American rely on expensive banking services while approximately 7 million Americans do not have a bank account. With these numbers in mind, the administration also announced plans to investigate how crypto-related technologies can improve financial inclusion. As stated by the White House, Biden will consider recommendations for a federal framework to oversee nonbank payment services and the indirect support for developing payment technologies.