Digital asset regulation has been a hotly debated topic in the United States for some time. An Executive Order by US President Joe Biden calls for the acceleration of efforts in crypto regulation and CBDC development.
The move was announced several weeks ago, with a commentary by treasury secretary Janet Yellen published early and deleted shortly afterwards. A fact sheet of the long-awaited Executive Order was also made public four hours before its scheduled release, describing the document in broad strokes. It appears that the Biden Administration wants to focus primarily on comprehensive regulation of cryptocurrencies as well as the rapid development of a central bank digital currency (CBDC).
Clear regulation instead of prohibition
According to Treasury Department estimates, about 16% of all U.S. adults have already traded cryptocurrencies. Combined with the rapid growth of the sector it is critical to address consumer risks on the one hand, but not stand in the way of innovation on the other. Biden's Executive Order outlines, according to the fact sheet, the historically first overall government approach to cryptoassets and blockchain technology.
"President Biden's historic Executive Order calls for a coordinated and comprehensive approach to digital asset policy. This approach will support responsible innovation that could bring significant benefits to the nation, consumers, and businesses. It will also address risks associated with illegal financing, protect consumers and investors and prevent threats to the financial system and the broader economy." - Janet Yellen, U.S. Treasury Secretary
The effort involves numerous agencies to oversee traditional financial products and to develop a comprehensive framework in cooperation with congress. The probability of a complete ban on the sector is therefore approaching zero; in the meantime, the U.S. government also seems to have opted for the regulatory approach.
Acceleration of CBDC research
In addition to integrating digital assets into the financial system, Biden's Executive Order focuses on considering and developing a central bank digital currency (CBDC). The government is to give a higher priority to researching a dollar based on distributed ledger technology (DLT) if the issue is deemed to be of national interest. The Federal Reserve would be supported in its efforts to date and encouraged to accelerate ongoing research.
In late January, the Federal Reserve Board released an initial discussion paper examining the pros and cons of a potential U.S. CBDC. The central bank invited public comment and took the first step in a discussion of whether and how a CBDC could improve the domestic payments system. The paper did not advocate a specific policy outcome, but it did want the explicit mandate from Congress.
