Three Months In: A Refresher on the Presidential Executive Order on Digital Assets

Do you think the federal government will be accurate in their assessments and reports and how far would you like to see their regulation extend?

Introduction

On March 9, 2022, President Biden issued the Executive Order on Ensuring Responsible Development of Digital Assets, sounding the call for an extensive review of digital assets and cryptocurrencies. The overall objective of the executive order was to examine the risks and benefits of cryptocurrencies, as well as to set in motion such research conducive to building a fair and safe market with adequate and proper regulatory considerations to ensure the safety of investors. This signals a growing interest in crypto currency and digital assets, which had grown to a $3 trillion digital asset market cap as of November of 2021. The following is a summary of the key sections of the executive order, with much of the assigned research set to be completed before years end. Three months after the issuance of the order, several questions beg to be asked: Do you believe the objectives of the Biden Administration have been addressed properly? Do you find that the federal government has been and will continue to be accurate in their assessments and reports? How far would you like to see any resulting regulations extend?

Objectives of the Order

The objectives of the executive order are to: 

1.      Protect consumers, investors, and businesses by directing the Treasury and other federal agencies to assess and develop policy recommendations to address the implications of digital assets. 

2.      Support technological advances and ensure responsible development and use of digital assets by directing concrete steps to study and support technological advances.

3.      Promote equitable access to safe and affordable financial services by affirming the critical need for safe, affordable, and accessible financial services as a U.S. national interest. 

4.      Ensure the U.S. remains at the forefront of responsible development and design of digital assets and the technology that underpins new forms of payments by setting standards that promote:

• Democratic Values

• The Rule of Law

• Privacy

• The Protection of Consumers, Investors, and Businesses

Coordination of the Order

The Assistant to the President for National Security Affairs (APNSA) and the Assistant to the President for Economic Policy (APEP) were tabbed within the order to coordinate and execute the actions necessary for implementation. The interagency access includes a wide swath of federal agencies and figureheads, including but not limited to; the Secretaries of State, Treasury, and Defense; the Attorney General; the SEC, FTC, and CFTC; and other pertinent Agency Directors. Nearly every federal agency is to review the objectives of the order listed above. 

Policy and Actions related to U.S. CBDC 

The Secretary of the Treasury must submit a report to the President on the future of money and payment systems, addressing the implications for the U.S. financial system and how to drive adoption of digital assets. One objective of the report is to determine the implications in the United States of the implementation of a Central Bank Digital Currency “CBDC”. 

The Chairman of the Board of Governors of the Federal reserve has been encouraged to continue their research on CBDC implantation in the United States. The executive order tasks the Board of Governors with determining whether a CBDC can improve efficiency and reduce costs of payment systems and then develops a potential plan for the launch of a CBDC.  

Additionally, the attorney general must provide the President an assessment of potential legislative changes needed to introduce and implement a CDBC to the American market. The attorney general’s role is to evaluate current legislation and assess whether new legislation should be created to address the issuance of a CBDC. With the report from the Treasury, the attorney general is to propose new legislation to address the impact of a CBDC on the U.S. financial system.

 Measures to Protect Consumers, Investors, and Businesses

The department of the Treasury must submit a report to the President on the adoption of digital assists in the financial market and the payment system infrastructure related to consumers, investors, and businesses. The executive order seeks to address the risks and opportunities to consumers, investors, and businesses and to have Treasury propose policy recommendations, both regulatory and legislative, that protect consumers, investors, and businesses.  

The attorney general must submit a report on the role of law enforcement agencies in detecting, investigating, and prosecuting criminal activity related to digital assets. The objective for the attorney general is to determine the extent to which federal law enforcement agencies can participate in solving crimes involving digital assets.  

The executive order tasks the FTC and CFPB (Consumer Financial Protection Bureau) to consider the privacy and consumer protection measures that may be used to protect users of digital assets and assess whether additional measures may be needed. The executive order further tasks the SEC, CFTC, the Federal Reserve, the Federal Deposit Insurance Corporation, and the Comptroller of the Currency to consider investor and market protection measures to address the risks of digital assets and to determine whether any additional measures may be needed to protect investors and the markets for digital assets. The Office of Science and Technology Policy (OSTP) must submit a report to the President on the connection between distributed ledger technology and energy transitions with the objective to identify the potential impacts the innovative technologies impose on the administration's efforts to combat climate change and the impact the technology has on the environment.   

Actions to Promote Financial Stability, Mitigate Systemic Risk, and Strengthen Market Integrity 

The executive order seeks the views of the attorney general, along with the Secretaries of Treasury, State, Commerce, Homeland Security, and the Director of the OMB, and the Director of National Intelligence Agency through the submittal to the President outlining their views on the illicit finance risk posed by digital assets.  The executive order also calls for the submission to Congress of a National Strategy for Combating Terrorist and Other Illicit Financing.  Here, the executive order seeks to gather the proposed views of various agencies with respect to the issues and concerns around the illicit use of digital assets and the trends in the known use of digital assets by illicit actors. 

Further, the executive order tasks Treasury with developing an action plan for mitigating the digital asset illicit finance and national security risks addressed in the submission to Congress of the National Strategy for Combating Terrorist and Other Illicit Financing.  The executive order seeks to address the role of law enforcement and enforcement measures to increase financial services providers’ compliance with AML/CFT obligations.  

The Secretary of the Treasury must notify the relevant agencies upon completion of the National Money Laundering Risk Assessment; the National Terrorist Financing Risk Assessment; the National Proliferation Financing Risk Assessment; and the updated National Strategy for Combating Terrorist and Other Illicit Financing. 

Policy and Actions Related to Fostering International Cooperation and United States Competitiveness

 The Secretary of the Treasury must establish a framework for interagency international engagement with foreign counterparts to adapt, update and enhance adoption of global principles and standards for how digital assets are used and transacted and to promote development of digital asset and CBDC technologies. The executive order aims to ensure international communication with foreign partners on digital asset management aligns with the values of the United States.

Furthermore, the attorney general must submit a report to the President on how to strengthen international law enforcement cooperation for detecting, investigating, and prosecuting criminal activity related to digital assets. The goal is to enhance the government’s ability to intervene in digital asset related international crimes. 

Conclusion

After reviewing this brief refresher on the Biden Administration’s executive order, how do you feel about the progress made thus far? Reach out to us at Around the Blockchain, or directly to the author Riley D. Matthews! We want to hear your take.

Riley is the Public Relations Chair for Stetson Blockchain & Law Society and currently working as a Summer Associate at CoreX Legal.

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This newsletter is written, curated, annotated, and edited by Christopher Foreman (Twitter - @CryptlessInSEA) and Kyler Wandler (Twitter - @KylerW56) with consultation and input from Jacob Robinson of the Law of Code Podcast, editing from TΞxas ₿l◎ckchain LawyΞr , in collaboration with Ann Sofie Cloots, and support from the Blockchain Barristers Law Student Collective.

The articles and opinions in this newsletter are not legal or financial advice. For legal and financial guidance, please consult a qualified attorney or financial advisor.

Special Thanks: Way GIF