Citing the dramatic growth in markets for digital assets with profound implications for consumers, investors and businesses, an Executive Order has been issued calling for the “responsible development of digital assets.”
The March 9 Executive Order appears to call on nearly every federal agency to review and develop policy recommendations regarding their respective area of jurisdiction, with the potential of even developing a U.S. central bank digital currency. As such, it lays out a national policy for digital assets across six 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.
“While many activities involving digital assets are within the scope of existing domestic laws and regulations, an area where the United States has been a global leader, growing development and adoption of digital assets and related innovations, as well as inconsistent controls to defend against certain key risks, necessitate an evolution and alignment of the United States Government approach to digital assets,” the E.O. states.
According to the administration, as of November 2021, non-state issued digital assets reached a combined market capitalization of $3 trillion, up from approximately $14 billion in November 2016. Additionally, the administration notes that surveys suggest that around 16% of adult Americans—or approximately 40 million people—have invested in, traded or used cryptocurrencies. Moreover, it notes that monetary authorities globally are also exploring, and in some cases introducing, central bank digital currencies (CBDCs).
U.S. Digital Currency?
Therefore, the E.O. contends, the government must promote access to safe and affordable financial services. “The United States has a strong interest in promoting responsible innovation that expands equitable access to financial services, particularly for those Americans underserved by the traditional banking system, including by making investments and domestic and cross-border funds transfers and payments cheaper, faster, and safer, and by promoting greater and more cost-efficient access to financial products and services,” it states.
The E.O. explains that the administration sees merit in a U.S. CBDC and in multicountry conversations and pilot projects involving CBDCs. “A United States CBDC may have the potential to support efficient and low-cost transactions, particularly for crossborder funds transfers and payments, and to foster greater access to the financial system, with fewer of the risks posed by private sector-administered digital assets,” it states.
In prioritizing the assessment of potential benefits and risks, the E.O. calls for a review within 180 days on the potential U.S. CBDC design options that, among other things, address the potential implications for national interests, including implications for economic growth and stability, the financial system and monetary policy, and the potential relationship between a CBDC and private sector-administered digital assets.
Coordinated Review
The overall review will be coordinated through the Assistant to the President for National Security Affairs and the Assistant to the President for Economic Policy through an interagency process.
The E.O. also directs the Treasury Secretary, in consultation with the heads of other relevant agencies, within 180 days to submit a report on the future of money and payment systems, including:
- the conditions that drive broad adoption of digital assets;
- the extent to which technological innovation may influence these outcomes; and
- the implications for the U.S. financial system with respect to the modernization of and changes to payment systems, economic growth, financial inclusion and national security.
Protecting Investors and Market Integrity
In the area of protecting consumers, investors and businesses, the E.O. further calls on the Treasury Secretary, in consultation with the Labor Secretary and the heads of other relevant agencies, such as the SEC, the CFTC and the CFPB, to report on the implications of developments and adoption of digital assets and changes in financial market and payment system infrastructures.
In addition to addressing the conditions that would drive mass adoption of different types of digital assets, the report shall also include policy recommendations, including potential regulatory and legislative actions.
Similarly, in the area of promoting financial stability and market integrity, the Order calls on the Treasury Secretary to convene the Financial Stability Oversight Council (FSOC) to assess the financial stability risks and regulatory gaps posed by the ongoing adoption of digital assets.
“As we take on this important work, we’ll be guided by consumer and investor protection groups, market participants, and other leading experts. Treasury will work to promote a fairer, more inclusive, and more efficient financial system, while building on our ongoing work to counter illicit finance, and prevent risks to financial stability and national security,” Treasury Secretary Janet Yellen said in a statement.
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