We have written often about the efforts of the United States Securities and Exchange Commission (here and here) and Commodity Futures Trading Commission (here and here) to regulate in the cryptocurrency space. On May 19, 2022, the U.S. Department of Commerce entered the fray by publishing in the Federal Register a Request for Comments (RFC) under the title “Developing a Framework on Competitiveness of Digital Asset Technologies.” The impetus for the publication was President Biden’s March 9, 2022 Executive Order — “Ensuring Responsible Development of Digital Assets” — which the White House described as the first ever, whole-of-government approach to addressing the risks and harnessing the potential benefits of digital assets and their underlying technology.
Section 2 of the Executive Order provides six principle policy objectives for digital assets: (a) Protection of consumers, investors, and businesses in the United States; (b) protection of United States and global financial stability and the mitigation of systemic risk; (c) mitigation of illicit finance and national security risks posed by misuse of digital assets; (d) reinforcement of U.S. leadership in the global financial system and in technological and economic competitiveness, including through the responsible development of payment innovations and digital assets; (e) promotion of access to safe and affordable financial services; and (f) support of technological advances that promote responsible development and use of digital assets.
Section 8(b)(iii) of the Executive Order directs the Secretary of Commerce, in consultation with the Secretary of State, the Secretary of the Treasury, and the heads of any other relevant agencies, to (within 180 days of the date of the Executive Order) establish a framework for enhancing U.S. economic competitiveness in, and leveraging of, digital asset technologies. The RFC offers an opportunity for all interested parties to provide relevant input and recommendations for consideration in Commerce’s development of this economic competitiveness framework.
The RFC welcomed input on any matter that commenters believed is relevant to Commerce’s development of the framework for enhancing U.S. economic competitiveness in, and leveraging of, digital asset technologies. But it also listed 17 specific questions under the headings of (i) competitiveness, (ii) comparisons to ‘traditional’ financial services and financial inclusion considerations, and (iii) technological developments.
Some of the questions are:
(1) What are the features of U.S.-based digital asset businesses ( e.g., administrators, operators, validators, and other key stakeholder roles in the function of digital assets as well as the exchanges, brokers, and custodians used to trade and store them) that currently underpin their competitiveness in a global market? Will these features support future competitiveness?
(2) What obstacles do U.S. digital asset businesses face when competing globally? How have these obstacles changed over the past five years and are any anticipated to disappear? Are there clearly foreseeable new obstacles that they will face in the future? What steps could the U.S. government take to remove, minimize, or forestall any obstacles?
(4) What are the primary challenges to U.S. technological leadership in the digital assets sector?
(11) By what metrics should we measure the competitiveness of the U.S. digital assets sector in the global market? Are there existing measurements or data against these metrics?
(12) What factors and conditions, if any, that have driven and sustained the global leadership of U.S.-based legacy financial institutions will foster the same leadership for U.S. digital asset businesses? If there are no common factors, what factors and conditions will differentiate global competitiveness for U.S. digital asset businesses?
(13) Can digital assets improve international payments (including trade and remittances), and improve on access to trade finance? If so, how? How do digital assets compare to other initiatives in payments such as the Federal Reserve’s FedNow?
(16) What new security concerns does increased adoption of digital assets raise? How can the U.S. government collaborate with U.S. digital asset businesses to protect consumers’ access to their assets, personal information, and other sensitive data?
The deadline for comments is July 5, 2022.