On Wednesday, March 9, the “Executive Order on Ensuring Responsible Innovation in Digital Assets” was issued, providing the digital asset industry with a roadmap for the Biden Administration’s policy-making efforts. While many agencies have engaged digital asset players so far, this is the first comprehensive public action to coordinate the federal government under the same framework for oversight and promotion of the crypto industry.
The Executive Order does not apply any immediate regulation or indicate specific policy, but the six principles and eight policy directives it includes send clear positive signals for the industry, namely:
- The highest echelons of American government get the potential value of crypto, and want to help: The reckoning of crypto's potential is bursting from the Executive Order, backed by statistics, research, and a commitment to enabling its potential by mitigating its risks.
- Today more than ever before in crypto, sensible regulation means growth: Bitcoin jumped nearly 10% this morning after the news - that speaks volumes to how pro-regulation the industry has become and how thirsty it is for regulatory clarity. Until pretty recently, similar news would have caused price drops.
- The conversation is moving away from questions like, “is it a security or a commodity” and “which agency should regulate crypto”. Instead, we're seeing a clear message: There's a new technology here that's full of potential, but it requires sensible, thoughtful regulations.
- The industry has crossed the regulatory rubicon: The focus is expanding from the narrow, critical laser on anti-money laundering to developing comprehensive whole-of-government frameworks that include market integrity, anti-market manipulation, consumer protection, and financial stability. The industry is prepared with advanced risk monitoring and compliance programs.
Pursuant to the Order, the national policy for digital assets will be based on six key principles: consumer and investor protection, financial stability, illicit finance and national security, U.S. leadership in the global financial system and economic competitiveness, financial inclusion, and responsible innovation.
Additionally, the Executive Order included several notable directives to various government agencies to begin the process of researching and developing policy recommendations for responsible development and use of digital assets:
- Directing the Treasury Department with agency partners to report on the future of money and payment systems, including the implications associated with adoption of digital assets and development of a U.S. central bank digital currency (CBDC).
- Encouraging the Federal Reserve Board of Governors to continue researching and reporting on a U.S. CBDC.
- Directing the Attorney General to report on the role of law enforcement agencies in detecting, investigating, and prosecuting criminal activity related to digital assets.
- Directing the Office of Science and Technology Policy with agency partners to report on connections between distributed ledger technology and short-, medium-, and long-term economic and energy transitions and the potential for these technologies to impede or advance efforts to counter climate change.
- Directing the Treasury Department with agency partners to outline the specific financial stability risks and regulatory gaps posed by various types of digital assets and providing recommendations to address such risks.
- Directing the Treasury Department with agency partners to develop a framework for interagency international engagement related to principles and standards for the use and development of digital assets and CBDCs.
- Directing the Department of Commerce to establish a framework for enhancing U.S. economic competitiveness in, and leveraging of, digital asset technologies.
As the excitement surrounding the Executive Order itself wanes over the next few days, the industry will be eager to engage with policymakers to assist in developing tangible policies stemming from its directives.