Exploring Biden’s Executive Order on Crypto, 6 Months On

You thought we would talk more about FTX, right? We will, but not this week. CoinDesk released its annual Most Influential Series on Monday, highlighting a number of regulators, lawmakers, and equally influential individuals. I spoke to Carole House, one of the authors of the White House Executive Order on Cryptography, to take a look at the document, its origins, and where we are now.

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The narrator

I spoke with Carole House, a former White House National Security Council official and one of the authors of the Executive Order on Ensuring Responsible Development of Digital Assets, about how the document was crafted and results to date.

why is it important

You can read the gist of it in CoinDesk’s most influential series. But here are some more details from our conversation.

break it down

It should be noted from the outset that many major questions about how the United States will regulate digital assets remain unanswered. A turf war simmering between the Securities and Exchange Commission and the Commodity Futures Trading Commission is no closer to a conclusion than it was when the order was first issued. The question of whether and how the federal government can enact policies favorable to blockchain development is also up in the air.

Yet we now have a clearer picture of how the government is addressing this issue. The White House and various executive branch departments released the first rounds of reports, addressing a number of issues including considerations for a central bank digital currency, how crypto-related crimes could be prosecuted and how the United States sees itself on the world stage.

More reports are expected, including one addressing whether the Federal Reserve has the authority to issue a digital dollar and another looking at the kind of regulatory gaps that still exist in crypto oversight.

One of the White House documents, released in September, proposed a “comprehensive framework for [the] responsible development of digital assets,” which suggested a federal regulatory regime for non-bank payment providers, which crypto businesses would want, given the current system of applying for state funds transfer licenses in each state in which companies wish to settle.

“I am totally thrilled with the reports released by the White House, and I am so proud of the entire interagency, for coming together and creating this first-ever comprehensive framework for the responsible development of digital assets,” said said House. “There’s incredibly innovative content and stuff that we’ve never seen before, certainly in any US approach, and that I really don’t see in many, if any, international approaches.”

To date, the Treasury, Commerce, and Justice Departments, as well as the White House Office of Science and Technology Policy, have released responses to the executive order. The Department of Justice has taken perhaps the most concrete steps through two reports, creating a network of prosecutors specializing in cryptocurrency crimes and recommending a number of laws to both better prosecute cryptocurrency crimes -currency and share more information about them with the ministry’s international partners.

The Department of Commerce has taken a slightly different approach, reflecting the agency’s mission. In a September report, the department recommended increased engagement with private companies and international regulators “to promote the development of digital asset policies…consistent with American values ​​and standards.”

This could include supporting educational initiatives and developing a workforce, according to the report.

The Treasury Department released the most reports and launched a request for comment process asking the general public to comment on certain illicit financial concerns.

“We had totally complementary documents from the White House, such as research and development advice from the Office of Science and Technology Policy, the list of critical emerging technologies that indicated that distributed ledger technologies and digital assets were critical emerging technologies, many mutually reinforcing policy objectives. that indicate that responsible space development is beneficial to the United States for economic and national security purposes, but also demonstrate that it must be responsible development,” House said.

House stressed the importance of the “responsible development” aspect of the reports. Financial inclusion through decentralized systems could be very beneficial, but if it develops without any protection for consumers, “it is not, in fact, a desirable outcome”.

Wider impact

Much of the decree focuses on risk assessment and mitigation, be it money laundering, terrorist financing or financial stability risks.

“The second part of [executive order]after outlining all of the policy goals that the president had…that’s where there were some very specific concrete actions that were directed or requested, like asking the Financial Stability Oversight Board to assess the risks of financial stability that are present in the space in the future of financial reporting,” House said.

The administration readily called for more public information to answer questions about the role of cryptocurrencies in illicit finance, the same area the executive order actually started. The department’s brief request for comment poses a number of questions.

Curiously, the risk analysis goes all the way to the staff. Part of the commission directs an analysis on the potential of crypto to address financial inclusion issues.

“[The order] recognizes that our assessment of the potential risks and benefits of digital assets must include an understanding of how our financial system does and does not meet the current needs of consumers in a fair, inclusive and efficient manner,” a House official said. White in Mars. “[Our] outdated payment infrastructure [is] leaving the United States and its consumers with slow, expensive, or downright inaccessible options, such as cross-border payments. This is why this decree orders a report on the future of money and payments.

This would seem to support current US research on central bank digital currencies and, in particular, whether the Fed should issue a digital dollar. The idea remains controversial, with opponents of the CBDC generally disliking the concept of US central bank involvement, and other skeptics that a token-based digital currency like the one suggested would be able to meet the needs of this lofty goal.

But to that end, one of the reports “tried to assess, from a very holistic picture, what the future of money looks like,” House said.

Noting the scope of the executive order, House pointed to concerns about climate risks (on which the White House Office of Science and Technology Policy released a report earlier this year) as an example of one of many issues being addressed. .

The order didn’t just focus on business, it looked at broader ecological issues, namely climate change.

“Each policy goal, which outlined many separate issues like us, we highlighted climate risks, which is a huge priority for the administration,” House said.

Notice that things are different now than they were when this ordinance was written and published. Crypto’s year 2022 has been marked by failures, bankruptcies, and millions of crypto dollars likely lost by investors. The meltdowns spanned the gamut of issues regulators pay attention to, ranging from stablecoins to lenders to exchanges.

Regulators are already assessing whether existing or new laws would prevent the next Terra or Celsius. The scale of the problems crypto faces this year should demonstrate the need for transparent communication about the industry, House said.

This ranges from decentralized finance (DeFi) to more centralized projects.

“A lot of this was predictable, and it’s extremely unfortunate that so many people were hurt in these circumstances,” House said. “But at the end of the day, … there are things that some in the industry don’t want to hear, which is that there needs to be more effective regulation, in some cases, enforcement in other cases, and just implementation and compliance in others. ”

Changing of the guard

Legend: (nom.) = nominee, (rum.) = rumor, (act.) = interim, (inc.) = incumbent (no replacement planned)

N / A

  • (New York magazine) Congress passed and U.S. President Joe Biden signed a bill to force U.S. railroad unions to agree to a new contract giving workers a raise and an extra day of personal time off, but without giving them paid sick leave. nor address some of the broader concerns. the workers had on the industry. The unions were due to strike this week. New York Magazine’s Intelligencer explains what the current status quo is and how we got here. (See also this September New York Times article and this Vice News article.)
  • (Reuters) The administration of Salvadoran President Nayib Bukele runs what appears to be a highly sophisticated online public relations operation, Reuters reports.
  • (The Wall Street Journal) Former SEC Chairman Jay Clayton and former CFTC Chairman Timothy Massad published an op-ed suggesting how their former agencies could regulate the industry more tightly without the need for congressional action.

OMG always laughs. Please keep coming. I feel like a kid again on Christmas morning. pic.twitter.com/PX0fLljCtT

— Briankrebs (@briankrebs) December 2, 2022

All the smartest people I know are getting into web3.

On an unrelated note, all are prosecutors.

— Luke Metro (@luke_metro) November 28, 2022

If you have any ideas or questions about what I should be discussing next week or any other feedback you’d like to share, please feel free to email me at nik@coindesk.com or find me on Twitter @nikhileshde.

You can also join the group chat on Telegram.

See you next week !

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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