Order seeks ‘coordinated approach’ to digital assets; outlines need for oversight, rules, CBDC exploration

A “coordinated and comprehensive approach” to digital asset policy is the aim of an executive order issued early Wednesday by President Joe Biden (D) that is widely viewed as a first step toward regulation of stablecoins, cryptocurrencies and other devices.

Among other things, the order urges regulators to “ensure sufficient oversight,” develop rules to address regulatory gaps, and explore use of a U.S. central bank digital currency (CBDC) while encouraging the Federal Reserve to continue its assessment of the digital pay vehicle.

The order mandates an “unprecedented focus of coordinated action across all relevant U.S. Government agencies” to mitigate the opportunities crypto presents for illicit financial transactions that could pose national security risks, according to a fact sheet released by the White House.

The fact sheet says that the order “lays out a national policy for digital assets across six key priorities: consumer and investor protection; financial stability; illicit finance; U.S. leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation.”

More specifically, according to the fact sheet, the order calls for measures to:

  • Protect U.S. consumers, investors, and businesses by directing Treasury and other agency partners “to assess and develop policy recommendations to address the implications of the growing digital asset sector and changes in financial markets for consumers, investors, businesses, and equitable economic growth.” The order also encourages regulators to ensure sufficient oversight and safeguard against any systemic financial risks posed by digital assets.
  • Protect U.S. and global financial stability and mitigate systemic risk (by encouraging the Financial Stability Oversight Council [FSOC] to identify and mitigate systemic financial risks posed by digital assets and to develop appropriate policy recommendations to address any regulatory gaps).
  • Mitigate the illicit finance and national security risks posed by the illicit use of digital assets (by directing an “unprecedented focus of coordinated action” across all relevant U.S. government agencies – and foreign allies – to mitigate the risks and to “ensure international frameworks, capabilities, and partnerships are aligned and responsive to risks).
  • Promote U.S. leadership in technology and economic competitiveness to reinforce U.S. leadership in the global financial system (by directing the Commerce Department to work across the federal government and establish a framework to “drive U.S. competitiveness and leadership in, and leveraging of digital asset technologies”).
  • Promote equitable access to safe and affordable financial services (by “affirming the critical need for safe, affordable, and accessible financial services as a U.S. national interest that must inform our approach to digital asset innovation, including disparate impact risk.” The order asserted that such safe access is especially important for communities that have long had insufficient access to financial services. Additionally, Treasury is charged with “working with all relevant agencies” to produce a report on the future of money and payment systems, to include “implications for economic growth, financial growth and inclusion, national security, and the extent to which technological innovation may influence that future”).
  • Support technological advances and ensure responsible development and use of digital assets (by directing the U.S. government to “take concrete steps to study and support technological advances in the responsible development, design, and implementation of digital asset systems while prioritizing privacy, security, combating illicit exploitation, and reducing negative climate impacts”).
  • Explore a U.S. central bank digital currency (CBDC) by placing urgency on research and development of a potential U.S. CBDC, “should issuance be deemed in the national interest.” The order directs the federal government to assess the “technological infrastructure and capacity needs for a potential U.S. CBDC in a manner that protects Americans’ interests.”

The fact sheet said the order also encourages the Federal Reserve to continue its research, development, and assessment efforts for a U.S. CBDC, including development of a plan for broader U.S. government action in support of their work. “This effort prioritizes U.S. participation in multi-country experimentation, and ensures U.S. leadership internationally to promote CBDC development that is consistent with U.S. priorities and democratic values.”

FACT SHEET: President Biden to Sign Executive Order on Ensuring Responsible Development of Digital Assets