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President Biden Signs Executive Order on Ensuring Responsible Development of Digital AssetsRead Time: 2 mins
On March 9, 2022, President Biden signed an Executive Order that serves as the first “whole-of-government” strategy that addresses both the benefits and risks of digital assets and their underlying technology. The Order outlines six priorities that factor into addressing a national policy for digital assets, which include: consumer and investor protection; financial stability; illicit finance; U.S. leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation.
The priorities call attention to the heightened risk that digital assets pose to consumers, investors, and businesses if risks are not properly mitigated and protections are not implemented. The priorities highlight that oversight, standards, and other safeguards are essential in digital asset exchanges, trading platforms, and financial services so that appropriate measures are taken to ensure consumer protection and privacy and to prevent unlawful surveillance that ultimately can contribute to human rights abuses.
Additionally, the priorities address the need to mitigate illicit finance and national security risks posed by misuse of digital assets, including money laundering, cybercrime, ransomware, narcotics and human trafficking, and terrorism and proliferation financing. The Order acknowledges that the growth in decentralized financial ecosystems, peer-to-peer payments activity, and obscured blockchain ledgers contributes to the market and national security risks. The U.S. must ensure appropriate controls and accountability for the digital asset ecosystem to promote heightened standards for regulation, oversight, and law enforcement action.
The priorities also address the United States leadership in the fabric of the global financial system, including its continued contributions in the development of payment innovations and digital assets, and the importance of remaining competitive in the technological and economic development of digital assets, architectures, platforms, and payment systems. However, it must do so responsibly by focusing on privacy, security, and technologies that defend against illicit finance activities, exploitation, and human rights violations, while reducing negative climate impacts and environmental pollution resulting from cryptocurrency mining.
Additionally, the Order calls for interagency coordination to implement the Order, and it articulates the “highest urgency” to research and develop the design and deployment of a United States Central Bank Digital Currency (“CBDC”) that is consistent with the priorities outlined in the Order, to ensure the global financial system has appropriate transparency, connectivity, and privacy protections. The Order explores the idea of a digital version of the U.S. Dollar. President Biden in the Order acknowledges the benefits and opportunities that digital currency can present, particularly with cross-border funds transfers and payments to foster greater access to the financial system, but not without risk mitigation. Relevant departments and agencies have between 90 and 180 days to submit reports to the President pertaining to topics such as the future of money and payment systems, the conditions of adopting broad digital assets and technological innovation that may influence the outcomes presented, the implications for the United States financial system, and means to address illicit finance risks.
Reprinted with permission from the American Bar Association’s Business Law Today March Month-In-Brief: Business Regulation & Regulated Industries.