Cryptocurrency prices continue to hover in the stratosphere, yet volatility remains one of the hallmarks of these digital assets. It’s this instability, along with the consumer protection issues and national security and climate-related risks associated with Bitcoin, Ethereum and the like, that have driven President Joe Biden to action.
President Biden’s Statement on Digital Assets and Cryptocurrencies
Earlier this month (on March 9), President Biden signed an Executive Order on Ensuring Responsible Development of Digital Assets that places the U.S. at the helm of technological leadership when it comes to digital assets like cryptocurrencies. The EO does so by supporting innovation, all the while abating risks to consumers, businesses, the financial system and climate.
Consumer Protection and Financial Stability
Crypto scams, related get-rich-quick-schemes and cybercrime has resulted in losses to untold consumers. In response, the President’s executive order directs the U.S. Treasury Department to assess and develop policy recommendations addressing the rapidly growing digital asset sector and downstream changes in financial markets. Not only that, the EO encourages regulators to safeguard against systemic financial risks posed by digital assets and creates significant oversight. In terms of the latter, FSOC (the Financial Stability Oversight Council) has been tasked with detecting and mitigating such systemic risks and penning suggestions to address regulatory gaps and related concerns.
Mitigation of Risks Posed by Illicit Use of Digital Assets
One of President Biden’s intentions in signing the executive order is to focus the attention of U.S. federal agencies to detect and protect against illicit actors using digital assets to facilitate malfeasance. In an effort to root out illegal activity in the crypto space, he has asked for “unprecedented . . . coordinated action” among these agencies to minimize finance and national security risks posed by cryptocurrencies. President Biden is seeking international collaboration on these issues too. In fact, the EO stresses cooperation with allies and partners globally to provide a worldwide framework to combat against the unlawful use of crypto.
Promotion of U.S. Leadership and Supporting Technological Advances
By way of the executive order, President Biden is looking to give the U.S. a competitive edge over other countries when it comes to crypto development. The EO emphasizes U.S. leadership by directing the Department of Commerce to establish a framework as to how technologies can best be leveraged to ensure America’s standing as the world’s leader in the digital asset sector (including cryptocurrencies, NFTs and other blockchain-related properties). Toward that end, the President has further directed the federal government to study and support technological advances in the design of digital asset systems, while simultaneously prioritizing privacy, security and the reduction of negative climate impact.
Exploration of a Digital Dollar
Finally, the executive order calls for the exploration of a central bank digital currency (CBDC)—essentially, a digital dollar. While there are no plans on the current horizon for the U.S. to launch its own digital currency, the EO charges the federal government with assessing the infrastructure and capacity needs for a potential CBDC, while encouraging the Federal Reserve to continue its own research on the topic.
Given all of the foregoing, 2022 continues to be a monumental year for changes in the regulatory landscape of digital assets. The Corporate & Securities team at Michelman & Robinson, LLP will continue to monitor the space and report back with any significant updates.
This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.