President Joe Biden walks from Marine One to the White House after traveling from Michigan, Washington, USA on September 14, 2022.
Tom Brenner | Reuters
Biden’s White House has released the first-ever framework for what US cryptocurrency regulation should look like. This includes how the financial services industry should evolve to facilitate cross-border transactions and how to crack down on digital asset fraud. space.
The new directive draws on existing regulators such as the Securities and Exchange Commission and the Commodity Futures Trading Commission, but no one has yet mandated anything. However, the long-awaited direction from Washington caught the attention of both the crypto industry at large and investors in this nascent asset class.
The framework is Presidential decree issued in MarchPresident Biden has called on federal agencies to study the risks and benefits of cryptocurrencies and issue an official report on their findings.
For six months, the agency has worked to develop its own framework and policy recommendations to address the six priorities outlined in the Executive Order. Consumer and investor protection. Promote financial stability. Combat illicit finance. US leadership in the global financial system and economic competitiveness. financial inclusion; and responsible innovation. These recommendations constitute the first “whole-of-government approach” to regulating the industry.
Brian Dees, Director of the National Economic Council, and Jake Sullivan, National Security Advisor, said in a statement that the new guidelines are intended to position the country as a leader in the governance of the domestic and international digital asset ecosystem. Said there was
Here are some key takeaways from the White House’s new cryptographic framework.
One section of the White House’s new framework for cryptocurrency regulation focuses on eliminating illegal activity in the industry.
“The President has asked Congress to amend the Bank Secrecy Act, the Data Loss Prevention Act, and the Act Prohibiting Unauthorized Money Transfers, to apply explicitly to digital asset service providers, including digital asset exchanges and non-fungible token (NFT) platforms. We plan to consider whether to ask for the ,” according to a White House fact sheet.
The president also asked whether to lobby Congress to increase penalties for unauthorized transfers, and to amend certain federal laws to allow the Justice Department to prosecute digital asset crimes in jurisdictions where crime victims are found. I am considering whether to
Regarding next steps, read the factsheet: “Treasury to complete illicit financial risk assessment on decentralized finance by end-February 2023 and on non-fungible tokens by July 2023.” .
Crime is rampant in the digital assets sector. Since the start of 2021, over $1 billion in cryptocurrency has been lost to fraud. According to a Federal Trade Commission study.
Last month, the SEC announced that it had indicted 11 people for creating and facilitating fraudulent cryptocurrency pyramids and Ponzi schemes that raised over $300 million from millions of retail investors around the world, including the United States. did. Meanwhile, in February, U.S. officials $3.6 billion worth of Bitcoin seized — The largest cryptocurrency seizure ever — linked to the 2016 hack of crypto exchange Bitfinex.
The framework also points to the potential for “big gains” from the US Central Bank Digital Currency (CBDC), which can be thought of as a digital form of the US dollar.
There are currently several different types of digital US dollars.
Commercial bank accounts across the country hold electronic US dollars partially backed by reserves under a system known as fractional reserve banking. As the name suggests, banks hold a portion of the bank’s deposit liabilities in reserves. Transferring this form of money from one bank to another or from one country to another takes place on traditional financial rails.
There are also many US dollar pegged stablecoins such as Tether and USD Coin. Critics have asked whether Tether has enough dollar reserves to back its currency. Largest stablecoin on the planet. Backed by USD Coin It is 1:1 convertible to US dollars and is managed by The Centre, a consortium of regulated financial institutions. It’s also relatively easy to use wherever you are.
Then there is the virtual digital dollar that the Federal Reserve will adopt CBDC. This is essentially just a digital twin of the US dollar. Fully regulated and under central authority, with the full trust and support of the country’s central bank.
“The CBDC-style dollar is the responsibility of the central bank. Did.
Federal Reserve Chairman Jerome Powell said before The main motivation for the US to launch its own Central Bank Digital Currency (CBDC) is to eliminate the use case of cryptocurrencies in the US.
“With U.S. digital currency, we wouldn’t need stablecoins or cryptocurrencies,” Powell said. “I think that’s one of the stronger arguments in favor of it.”
New White House Framework Says U.S. CBDC Will Enable a Payments System That Is “More Efficient, Provides A Foundation For Further Innovation, Facilitates Faster Cross-Border Transactions, And Is Environmentally Sustainable” points out the fact that it is possible to
“By making it accessible to a wide range of consumers, we can promote financial inclusion and equity,” the report continues.
To that end, the administration is asking the Fed to continue its ongoing research, testing, and evaluation of CBDCs.
For years, central banks and U.S. legislators have been calling for the rise of stablecoins, a specific subset of cryptocurrencies that have value pegged to real-world assets, such as fiat currencies like the U.S. dollar or commodities like gold. I lamented.
These non-governmental digital tokens are increasingly being used in domestic and international transactions. It’s scary because central banks have no say in how they regulate this area.
In May, TerraUSD, one of the most popular USD-pegged stablecoin projects, collapsed, cost investors tens of billions of dollars Some likened it to a bank run because they panicked.Widespread support — and Public PSAs — Credibility was given to the project by a respected financial institution, further promoting the narrative that everything was legal.
The implosion of the stablecoin project has led to a series of bankruptcies and the loss of nearly $600 billion in assets, according to the White House.
According to the White House fact sheet, “Digital assets and the mainstream financial system are increasingly intertwined, creating channels for disruption to spill over.”
The framework warns that stablecoins can be chaotic if not singled out and paired with proper regulation.
To make stablecoins “more secure,” the Treasury said it would “work with financial institutions to increase their cyber-vulnerability by sharing information, facilitating broad datasets and analytical tools, and collaborating with other institutions.” Strengthen its ability to identify and mitigate potential risks “to identify, track and analyze emerging strategic risks associated with digital asset markets”.
These efforts will also be coordinated with international allies such as the Organization for Economic Co-operation and Development and the Financial Stability Board.