On Wednesday, March 9, 2022, President Biden signed a first-of-its-kind executive order (the "Order") addressing regulation of cryptocurrencies and digital assets in the United States. Without making any explicit policy changes, the Order establishes six areas of focus for further research and examination by relevant federal agencies in the coming months:
- Consumer and investor protection;
- Promoting financial stability;
- Preventing illicit finance;
- Advancing U.S. leadership in the global financial system;
- Promoting financial inclusion and economic competitiveness; and
- Encouraging responsible innovation within the digital asset space.
The Order calls for a coordinated, interagency process headed by the White House National Security Advisor and the Assistant to the President for Economic Policy. The broad array of federal regulatory agencies tasked with studying these issues and reporting on their findings signals that the Biden administration intends to provide clarity regarding the role of digital assets within the existing regulatory framework of traditional finance. The Order directs that initial reports from the Department of Treasury, the Financial Stability Oversight Council and the Department of Commerce are due in 180 days, with a final comprehensive report set for completion by March 9, 2023.
Notably, the Order instructs the Treasury Department and Federal Reserve to evaluate the design and potential deployment of a U.S.-issued Central Bank Digital Currency ("CBDC") as part of studying "the future of money" and ways in which the current financial system may fail to meet consumer needs. That evaluation will include whether legislative changes would be necessary for the United States to issue a CBDC. While a U.S. CBDC does not appear imminent, the fact the administration "places the highest urgency on research and development efforts" regarding a CBDC means this is something to track closely in the coming months.
Overall, the Order suggests that the "all of government" approach to be taken will be measured and thorough, while pursuing a broad set of ambitions, including the potential for a "digital dollar" to be issued as official U.S. legal tender. The Order suggests a willingness to engage with industry stakeholders in crafting legislation and regulatory changes that will foster responsible innovation with the ambition of keeping the United States as the primary financial power. Of course, the promise of a deliberate and thorough process does not guarantee a light touch, but the terms of debate that have been set are promising compared to earlier political rhetoric. We will continue to monitor developments and share our thoughts with clients and friends as more concrete steps are taken in this process.
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