The US is edging closer to developing a central bank digital currency (CBDC) after six months of research into the cryptocurrency industry. But the White House’s ‘first-ever’ comprehensive framework for the responsible development of digital assets has been criticised for ‘kicking the can down the road’.
Back in March, President Joe Biden issued an executive order (EO) calling on multiple agencies – Department of Treasury, Commerce, Justice and the White House Office of Science and Technology Policy – to do a ‘deep analysis’ of digital assets’ risks and opportunities.
This has resulted in nine reports outlining cryptocurrency impacts on financial markets, the environment, innovation and other elements of the economic system.
Together they ‘articulate a clear framework for responsible digital asset development’ calling on agencies to promote innovation by kickstarting private-sector research and development while mitigating the downside risks.
The reports also ‘recognise’ the potential benefits and risks of a US CBDC – or digital dollar – and encourage the Federal Reserve to continue its ongoing CBDC research, experimentation, and evaluation. It calls for the creation of a Treasury-led interagency working group to support the Federal Reserve’s efforts.
Regulatory and law enforcement agencies are also urged to collaborate to address acute digital assets risks facing consumers, investors, and businesses.
The framework development
Brian Deese, director of the National Economic Council, said: “The responsible development of digital assets is vital for American interests, from the wellbeing of consumers and investors to the safety and stability of our financial system, and for our financial and technological leadership around the world.
“We’ve seen in recent months substantial turmoil in cryptocurrency markets, and these events really highlight how, without proper oversight, cryptocurrencies risk harming everyday American’s financial stability and our national security.
“And it is why this administration believes that now more than ever prudent regulation of cryptocurrencies is needed if digital assets are going to play a role that we believe they can in fostering innovation and supporting our economic and technological competitiveness.”
The Biden administration has said it will take the following steps:
- US agencies will leverage US positions in international organisations to message US values related to digital assets. US agencies will also continue and expand their leadership roles on digital assets work at international organisations and standard-setting bodies
- The State Department, the Department of Justice (DOJ), and other US enforcement agencies will increase collaboration with—and assistance to—partner agencies in foreign countries through global enforcement bodies
- The State Department, Treasury, USAID, and other agencies will explore further technical assistance to developing countries building out digital asset infrastructure and services
- The Department of Commerce will help cutting-edge US financial technology and digital asset firms find a foothold in global markets for their products.
According to Sheila Warren, CEO of crypto advocacy group Crypto Council for Innovation, the White House’s announcement ‘seems to kick the can down the road’.
Warren says: “We don’t see clear recommendations. Those we do see seem to have an outdated and unbalanced understanding of the technology. This is surprising given the clear instructions from the EO and work from Members of Congress to move things forward.
Regulation by enforcement is not regulatory clarity. If we regulate by enforcement, it also gives other countries a clear runway to figure out how the tech works for their interests, which may be contrary to the US’s. In the hearing yesterday, leaders seemed worried about other countries overtaking the US.
“We know there is more to come as policymakers grapple with this complex and nuanced space. The Crypto Council will continue to provide input and help where we can. Connecting the innovators, builders and government leaders is key for next steps.”