On September 16, 2022 the White House released its Comprehensive Framework for Responsible Development of Digital Assets (Framework) for how the administration plans to address digital assets as a part of its “whole-of-government approach”, which was first outlined in a March 9 Executive Order (EO) issued by President Joe Biden.
In the short-term, the Framework does little to alter the regulatory uncertainty that has allowed many bad actors in the digital asset space to thrive while stymieing responsible growth. There are still many important questions that have gone unanswered, and this does not constitute official regulation or guidance from any regulatory authority.
However, this should be seen as an effort on the part of the current administration to create a unified approach moving forward. For the past few years, the digital asset industry has heard the mantra that “regulation is coming”, but it has seen little movement other than the occasional enforcement action. This may not change immediately, but the Framework could provide the policy initiative and guidance needed for some regulators to begin the process of providing much-needed regulatory clarity.
In the EO, President Biden laid out his administration’s six key priorities related to digital assets: (i) consumer and investor protection; (ii) financial stability; (iii) countering illicit finance; (iv) advancing US leadership in the international financial system; (v) financial inclusion; and (vi) driving responsible innovation.
The White House noted it has received nine multi-agency reports in response, which cover a wide range of policy topics associated with digital assets. The US Department of the Treasury’s Financial Stability Oversight Council (FSOC) will publish another one in October 2022, focusing on financial stability risks associated with digital assets.
The Framework highlights the priorities set forth in the EO and notes many of the suggestions that have been submitted. Among other things, the Framework establishes forums to convene multiple stakeholders in knowledge exchange and encourages the development of tech sprints and other innovation-driven events. It also instructs several agencies to track environmental impacts and provides for the creation and funding of education initiatives.
Agencies with investigation and enforcement authority are encouraged to “redouble their efforts” in holding bad actors accountable. The Framework also encourages agencies to issue guidance and rules designed to address many of the risks that have been identified in these reports.
While this framework does not constitute a change in policy, it does highlight the administration’s desire to encourage both regulation and innovation in this space. Most importantly, it helps coordinate cross-agency cooperation for both of these purposes.
- US Department of Commerce’s Report on Advancing US Competitiveness
- The US Department of Treasury’s Report on Illicit Financing
- The US Department of Justice’s Report on the Role of Law Enforcement in Digital Assets
- The US Department of Justice’s Report on how to Strengthen International Law Enforcement Cooperation for Detecting, Investigating, and Prosecuting Criminal Activity
- The US Department of Treasury’s Report on the Implications for Consumers Investors, and Businesses
- The US Department of Treasury’s Report on the Future of Money and Payments
- The Federal Reserve Board’s Report on the Potential and Risks of Decentralized Finance
- The Federal Reserve Board’s Report on the US Dollar in the Age of Digital Transformation and the Implementation of a Central Bank Digital Currency (CBDC)
- The Whitehouse Office of Science and Technology Policy’s Report on Climate and Energy Implications of Digital Assets