What you need to know about President Biden’s digital asset framework
The Comprehensive Framework for Responsible Development of Digital Assets (the “Framework”) and underlying agency reports offer initial indications of areas that the Administration may seek to pursue in forging a path for providers, consumers, investors, and businesses alike.
This Framework grows out of concerns that digital assets and their underlying technologies present unique and novel risks across several industries. These concerns are met, in part, by agency recommendations to “redouble [ ] efforts to [protect] against unfair, deceptive, or abusive practices” and “to aggressively pursue investigations and enforcement actions against unlawful practices in the digital assets space.”
Consumers can also look forward to financial literacy efforts that are aimed towards educating consumers on common fraudulent practices especially as they relate to digital assets.
Recognizing the inequalities that many digital asset ethos have long sought to address, the Administration’s Framework encourages the adoption and development of instant payment systems, a federal regulatory framework for nonbank payment providers, and improvements to cross-border payment systems.
However, these pursuits do not necessarily entail the utilization of digital assets as they have come to be understood and rather appear to primarily lean towards existing or emergent legacy technologies.
Aimed towards fostering financial stability in the digital asset market writ large, the Framework and reports suggest promoting consistent and comprehensive oversight among the several agencies to “identify, track, and analyze emerging strategic risks that relate to digital asset markets.” These efforts have been identified as a means to protect legacy markets from the perceived risks that digital asset markets may add to the mix.
The Framework also sets forth various manners in which the Administration hopes to foster innovation and competitiveness in the sector. Most significant are the encouragements that the Administration sets forth for the Treasury Department and financial regulators to provide “regulatory guidance, best-practices sharing, and technical assistance” to private sector participants. Meanwhile, the Department of Commerce has been tasked with helping the private sector to find “foothold[s] in global markets for their products.”
An oft repeated contention of digital assets has been their perceived ties to illicit finance and other nefarious activities. The Administration aims to address this front by considering “whether to call upon Congress to amend the Bank Secrecy Act (BSA), anti-tip-off statutes, and laws against unlicensed money transmitting to apply explicitly to digital asset service providers.” These pursuits will likely pair well with the impending changes under Congress’ National Defense Authorization Act for Fiscal Year 2021.
Perhaps the most surprising development from the Framework is the seemingly positive outlook towards developing a United States Central Bank Digital Currency (CBDC). The Framework highlights several favorable impacts a US CBDC may have, including being “more efficient, provid[ing] a foundation for further technological innovation, facilitat[ing] faster cross-border transactions, and [being] environmentally sustainable.” This is counterbalanced by explicit recognition that a US CBDC could face several risks such as a “run” and implicit recognition of several risks such as potential privacy concerns.
Still, the underlying report from the Treasury highlights that developing a US CBDC could take years – which might permit the intrastate effort in Wyoming to establish a state-government issued stable token to spearhead the broader US effort.
Despite the many positive implications the Framework sets forth, the digital asset space is still plagued by the dearth of guidance and related uncertainties that participants have been faced with navigating.
With our depth of expertise in the digital asset world, our team is uniquely positioned to help you navigate these new uncertainties. Click to get in touch.
