The President issued an executive order on ensuring responsible development of digital assets on March 9, 2022. The value of the cryptocurrency and digital asset industry exceeds $3 trillion and has the potential to grow much more with appropriate regulations. No country has taken a leadership role in crafting regulations that will foster innovation while simultaneously protecting consumers, investors, and businesses from criminal activity related to digital assets. This executive order is a bold move by the United States to assess and analyze the digital asset industry. If responsible EO-based legislation can be drafted and passed, the United States stands ready to allow a strong and effective regulatory approach that also promotes innovation.
This wide-ranging government effort involves all financial regulatory agencies, while bringing in the views of other economic and international agencies. The most important set of deliverables is a series of reports, assessments, frameworks and bills. This article provides an overview of these twenty reports grouped by due dates, with brief summaries of the considerations agencies should take into account and the analytical approach called for in the order.
This comprehensive effort focuses on developing a whole-of-government approach to collecting data, analyzing, consulting with civil society and preparing reports focusing on five major concerns:
- Assessing a possible U.S. central bank digital currency
- Protect consumers, investors and businesses
- Promoting financial stability, mitigating systemic risk and enhancing market integrity
- Limit illicit finance and associated national security risks
- Fostering International Cooperation and U.S. Competitiveness
This major cross-agency effort will succeed, at least in part, if the views of participants active in all sectors of the digital asset community have a voice. The interests of a Decentralized Autonomous Organization (DAO) are not necessarily the same as those of a Decentralized Exchange (DEX) or an NFT minting operation. Broad engagement between government, digital asset industry companies and civil society can be achieved through the normal advice and comment approach to rulemaking. Alternatively, a more inclusive and flexible process that allows digital asset industry participants and other interested parties, including those opposed to current digital asset markets, to help the government understand the industry and provide advice on regulatory approaches that will leverage the power of technology while protecting users.
The digital asset industry is so innovative and seemingly different from the current centralized regulatory model that it could pose challenges for government officials who are not at the forefront of innovation to make sound recommendations enabling decentralized mechanisms and technologies distributed ledger to thrive. It is foreseeable that the various agencies will make proposals specific to their regulatory mission(s). Without a cohesive mission or purpose for the effort, it will be difficult to come up with strong and effective law to guide the regulation of digital assets. Ideally, this entire government effort will lead to responsible, effective, and consistent regulatory solutions for the digital asset industry and the American people. Bringing a solid level of certainty to the digital asset industry will aid efforts to normalize it into a useful, accepted, and secure environment for financial and other activities.
The following tables provide a complete list of all deliverables required by the Executive Order. At the end of the process, if solutions can be negotiated between the agencies and the regulated sector, then real legislation can be developed and adopted in the reasonably near future. If so, the United States will be well placed to lead the global development of this promising technology sector.