Several agencies contributed to the new framework, as the Biden administration eyes a streamlined approach to regulating and benefitting from the volatile digital asset marketplace.
The Biden administration took the next step in its attempts to regulate the cryptocurrency and digital asset market by releasing a new national framework built on interagency research and input that aims to represent a diverse body of stakeholders.
Officials confirmed that pursuant to President Joe Biden’s previous executive order, nine reports authored by a bevy of federal agencies—including the departments of Treasury, Justice, and Commerce—were submitted to the Executive Office of the President to inform Biden’s digital asset development guidelines.
Some of the primary guidance included in the reports include directing financial regulatory agencies, like the Securities and Exchange Commission, to investigate fraud and misdeeds in the digital asset marketplace. The Consumer Financial Protection Bureau was tasked with monitoring consumer complaints and tracking potential abusive practices, as well as collaborating with law enforcement to address risks in the crypto space.
“We're doing deep analysis of digital assets, risks and opportunities to make policy recommendations so that we can build a framework that harnesses the potential benefits while decisively mitigating the risks,” an administration official said on Thursday.
Officials within the White House Office of Science and Technology Policy confirmed that the new framework will examine the environmental impacts of crypto mining and its excessive fossil fuel emissions and electricity consumption. The Department of Energy and the Environmental Protection Agency will be tasked with helming research into crypto assets’ environmental impact.
The reports also highlighted the need for further research on a potential central bank digital currency. Administration officials called laying the groundwork for a U.S.-issued CBDC a “critical priority” for the Biden administration.
“The reports provide a roadmap for reaping the fruits of responsible innovation and digital asset development,” the administration official said. “And to do so, and to advance innovation the reports call for the federal government to craft a digital asset research and development agenda.”
Treasury Secretary Janet Yellen also introduced the framework on Thursday, confirming that her agency will be releasing three reports on challenges surrounding digital assets operating within traditional financial services, while acknowledging potential benefits for a responsible marketplace.
One report authored by Treasury officials will underscore the need for additional CBDC research through a new working group within Treasury. A second report studies the frauds and scams rampant in the cryptocurrency and digital asset sector, and a third will further this topic by introducing the Illicit Finance Action Plan to identify how digital assets can be used as instruments to finance illegal operations.
“Overall, I believe that these reports, as well as others that we have consulted on with our interagency partners, provide a strong foundation for policy makers, as we work to realize the potential benefits of digital assets and to mitigate and minimize the risks,” Yellen said.
Consumer protections within the digital asset marketplace have been a hot topic on Capitol Hill, with multiple lawmakers calling for stricter control measures in place within the market to hinder fraud. While the national framework calls for greater law enforcement engagement in the digital asset space, it also advocates for more research into how digital currencies can benefit the country through a series of use cases.
Treasury Under Secretary for Domestic Finance Nellie Liang said that one of the reports does identify areas of misconduct and risks to market integrity, as well as reinforce existing enforcement actions taken by federal agencies through recommendations.
“At the same time. It highlights that there are some potential use cases for this technology,” she said.
Aside from CBDCs, other potential benefits could be new uses of distributed ledger software. Blockchain is one of the most popular forms of distributed ledger technologies, a key feature in many cryptocurrencies.
“The report makes a recommendation to advance further work on policy and technical issues, so that the US is in a position to issue one, should be determined in the national interest,” Liang said.
No rulemaking or legislative actions were recommended within the new framework, although consumer protections and greater regulation within digital asset trading have been a popular legislative topic on Capitol Hill. The framework will provide recommendations to Congress to help regulate the digital asset space, such as amending the Bank Secrecy Act to include digital assets.
“This is a new and very rapidly developing product space,” Liang said. “And…regulations need to be able to adjust to these new products and activities that are being offered.”