President Joe Biden’s Executive Order on Ensuring Responsible Development of Digital Assets sets forth an unprecedented federal framework for evaluating cryptocurrency regulation in the United States. The order’s objectives include protecting consumers from financial and cybersecurity risks while promoting affordable and inclusive financial services, preventing illicit financing and national security threats while promoting privacy and security, and reinforcing U.S. leadership in technology and economic competitiveness. To accomplish these goals, research and development efforts into a U.S. CBDC (Central Bank Digital Currency) are of “the highest urgency,” including the actions necessary to launch a CBDC and participating in international pilot projects. CBDCs are cryptocurrencies denominated in national units of account (such as U.S. Dollars), which are direct liabilities of a central bank (such as the U.S. Federal Reserve). The Treasury, Commerce Department, and other agencies must provide a report on U.S. CBDC design within six months of the order. The FTC, SEC, and federal banking agencies will include their analysis of what drives mass adoption of digital assets and the risks and opportunities of such growth, along with proposed regulatory and legislative actions to protect consumers while supporting expanded access to financial services. Technology heads of state must provide a technical plan for creating and maintaining a U.S. CBDC.
Citing concerns of money-laundering, cybercrime, corruption, and terrorist financing, various security agencies are tasked with analyzing the illicit financing risks of all cryptocurrencies and developing an action plan to address the role of law enforcement and how to increase financial services providers’ compliance with AML/CFT controls. A framework will be established for engaging with foreign partners on such compliance and global standards for digital asset transactions. The Treasury and Commerce Department are also tasked with reviewing how crypto can enhance U.S. economic competitiveness in the global economy.
Notably, the Executive Order did not hint at any specific positions being taken by the Administration, nor did it announce any new regulations. The Order generally appears to have been well-received by many crypto executives, including FTX’s Sam Bankman-Fried, who called the approach reasonable and constructive, noting that the federal government has been under pressure to provide greater regulatory clarity.