The nine reports submitted to the President to date, consistent with the EO’s deadlines, reflect the input and expertise of diverse stakeholders across government, industry, academia, and civil society. Together, they articulate a clear framework for responsible digital asset development and pave the way for further action at home and abroad. The reports call on agencies to promote innovation by kickstarting private-sector research and development and helping cutting-edge U.S. firms find footholds in global markets. At the same time, they call for measures to mitigate the downside risks, like increased enforcement of existing laws and the creation of commonsense efficiency standards for cryptocurrency mining. Recognizing the potential benefits and risks of a U.S. Central Bank Digital Currency (CBDC), the reports encourage the Federal Reserve to continue its ongoing CBDC research, experimentation, and evaluation and call for the creation of a Treasury-led interagency working group to support the Federal Reserve’s efforts.Below the fold I describe some of the details of this "framework", which unfortunately continues to use the misleading "digital asset" framing.
The framework addresses seven areas:
- Protecting Consumers, Investors, and Businesses. This area involves directing regulatory agencies to "aggressively pursue investigations and enforcement actions against unlawful practices" and consumer protection agencies to "monitor consumer complaints and to enforce against unfair, deceptive, or abusive practices". Alas, it fails to come down against the cryptocurrency lobbyists pushing the CFTC to be the regulator instead of the SEC.
- Promoting Access to Safe, Affordable Financial Services. This area recognizes the need to compete with "digital assets" by "adoption of instant payment systems, like FedNow, by supporting the development and use of innovative technologies by payment providers to increase access to instant payments, and using instant payment systems for their own transactions". It is ridiculuous that I can transfer money in the UK in minutes, but in the US it takes many days so the banks can feast on the float.
- Fostering Financial Stability. This area directs the Treasury to "work with financial institutions to bolster their capacity to identify and mitigate cyber vulnerabilities" and work internationally to identify systemic risks. Clearly, intrernational cooperation is needed, especially to rein in Binance.
- Advancing Responsible Innovation. This area is the inevitable sop to the cryptocurrency industry's peddling of the innovation meme about a system which simply repikcates existing financial products without the necessary regulation.
- Reinforcing Our Global Financial Leadership and Competitiveness. This area encourages agencies to work internationally to increase "collaboration with—and assistance to—partner agencies in foreign countries through global enforcement bodies". But, alas, it also directs the Commerce Department to "help cutting-edge U.S. financial technology and digital asset firms find a foothold in global markets for their products". Pro tip: you can't have it both ways.
- Fighting Illicit Finance. This area suggests needed legislative actions, and is based upon input from:
Treasury, DOJ/FBI, DHS, and NSF drafted risk assessments to provide the Administration with a comprehensive view of digital assets’ illicit-finance risks. The CFPB, an independent agency, also voluntarily provided information to the Administration as to risks arising from digital assets. The risks that agencies highlight include, but are not limited to, money laundering; terrorist financing; hacks that result in losses of funds; and fragilities, common practices, and fast-changing technology that may present vulnerabilities for misuse.Sanctioning Tornado Cash is a good start, but in the end the miscreants need exchanges to "cash out", so taking action against exchanges that accept coins tainted by Tornado Cash is the next important step.
- Exploring a U.S. Central Bank Digital Currency (CBDC). This area directs the Treasury to "lead an interagency working group to consider the potential implications of a U.S. CBDC, leverage cross-government technical expertise, and share information with partners". The US doesn't actually need a CBDC of the kind they're considering. A combination of FedNow and reviving postal banking (dormant since 1967) would do the trick.