On March 9, 2022, President Biden signed a historic executive order directing federal agencies and regulators to assess the risks and benefits of cryptocurrencies and examine the viability of a digital currency issued by the nation’s central bank (the Federal Reserve), referred to as a central bank digital currency (CBDC). The executive order also encourages regulators to examine options for oversight in the crypto space. While the executive order itself does not impose any regulations on the crypto industry, it indicates that a government-wide regulatory framework is on the horizon.
The executive order establishes six key objectives for the administration’s crypto policy: protecting consumers and investors, mitigating illicit activity, and promoting financial stability, U.S. competitiveness on a global stage, financial inclusion, and responsible innovation. To achieve these objectives, the executive order provides the following directions for agencies and regulators:
- Department of Treasury must assess the future of money and payment systems, including the implications of a U.S. CBDC, and develop policy recommendations to safeguard against potential systemic financial risks without stifling innovation.
- Federal Reserve should continue researching and evaluating potential design options for a U.S. CBDC and develop a blueprint for broader U.S. government action. The Federal Reserve must also consider whether it may use its authority for regulatory oversight.
- Director of the Office of Science and Technology Policy and the Chief Technology Officer of the United States must evaluate the technical infrastructure needed to implement a U.S. CBDC system and identify risks of various designs.
- Attorney General must determine whether new laws would be needed to issue a U.S. CBDC and, if so, recommend proposals for such laws. Moreover, the Attorney General must evaluate the intersection of law enforcement and digital assets, and recommend laws or regulations to assist law enforcement in detecting, investigating, and prosecuting criminal activity related to digital assets.
- SEC and CFTC should consider how their authority may be used to provide regulatory oversight.
This executive order marks a step toward a comprehensive regulatory framework for crypto, but it is too early to tell what (if any) regulation is coming down the road. As always, we are closely monitoring the crypto space and will continue to watch for regulatory developments stemming from this executive order.