Recent Cryptocurrency Updates: President Biden Issues Path Forward
Over the last decade, the digital asset market, including cryptocurrency, has swelled significantly and shows no signs of slowing down. However, the regulatory landscape includes an array of regulations, most not tailored to digital assets, from the Securities Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), Financial Crimes Enforcement Network (FinCEN), state and federal money transmitter laws, and many others. As the industry expands, many hope that there will be more guidance and regulations specific to digital assets to assist the industry in its growth. President Biden’s recent Executive Order (“Order”) hints that those wishes might come true, outlining a path forward through tasking many federal agencies with research projects to better understand digital assets and help guide the United States on how it should regulate the industry.
What Does This Mean?
Many of the objectives outlined in the Order relate to protection: protecting consumers, investors, and businesses; protecting global financial stability; protecting against illicit finance and national security risk from misuse of digital assets. However, the Order also explained that the United States must support technological advances that promote responsible development and use of digital assets.
To accomplish its various protection objectives, the Order tasks the heads of several independent regulatory agencies such as the Federal Trade Commission (FTC), SEC, CFTC, Federal banking agencies, and the Consumer Financial Protection Bureau (CFPB), to submit to the President a report on the implications of developments and adoption of digital assets and changes in financial market and payment system infrastructures for United States consumers, investors, businesses, and for equitable economic growth.
The Order also stated that “The Chair of the FTC and the Director of the CFPB are each encouraged to consider the extent to which privacy or consumer protection measures within their respective jurisdictions may be used to protect users of digital assets and whether additional measures may be needed.” The FTC has previously reported an uptick in cryptocurrency scams, and explained that “[s]ince October 2020, reports have skyrocketed, with nearly 7,000 people reporting losses of more than $80 million on these scams. Their reported median loss? $1,900. Compared to the same period a year earlier, that’s about twelve times the number of reports and nearly 1,000% more in reported losses.”
Another notable aspect of the Order is the potential introduction of a United States Central Bank Digital Currency (“CBDC”). The Order explained that Biden’s Administration “sees merit in showcasing United States leadership and participation in international fora related to CBDCs and in multi‑country conversations and pilot projects involving CBDCs.” According to the Order, a United States CBDC may have the potential to support efficient and low-cost transactions, particularly for cross‑border funds transfers and payments, and to foster greater access to the financial system, with fewer of the risks posed by private sector-administered digital assets.
The Secretary of the Treasury, in consultation with various other agencies, is tasked with submitting to the President a report on the potential implications of a United States CBDC, including on financial inclusion and the potential relationship between a CBDC and private sector-administered digital assets, among other things.
Issuing a United States CBDC could be a big step in further legitimizing and increasing the adoption of cryptocurrency, but whether it happens remains to be seen. The other agency reports are due within 120 days of the Order. We will have to wait and see what the reports portend and what additional measures, if any, the consumer protection bureaus deem are needed. Until the reports have been provided, and the regulators issue digital-asset-specific regulations, participants in the digital asset space should be prepared for both state and federal regulators to utilize existing regulations, rules and guidelines to protect consumers, investors and businesses.
If you are engaging, or contemplating engaging, in a digital asset project, contact the authors to learn more.