US President Joe Biden walks from Marine One to the White House after a flight from Michigan, in Washington, US, September 14, 2022.
Tom Brenner | Reuters
The Biden White House just released its first-ever framework on what crypto regulation in the United States should look like — including the ways the financial services industry should evolve to facilitate borderless transactions, and how to crack down on fraud in the digital asset space.
The new guidance harnesses the power of existing regulators such as the Securities and Exchange Commission and the Commodity Futures Trading Commission, but no one has yet mandated anything. However, the long-awaited trend from Washington has caught the attention of both the crypto industry as a whole – and investors in this emerging asset class.
frame follows The executive order was issued in MarchIn which President Biden called on federal agencies to examine the risks and benefits of cryptocurrencies and release official reports on their findings.
For six months, government agencies are developing their own frameworks and policy recommendations to address the half-dozen priorities listed in the Executive Order: consumer and investor protection; enhancing financial stability; combating illicit financing; American leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation. Together, these recommendations constitute the first “holistic approach to government” to regulate the industry.
The new guidelines aim to position the country as a leader in managing the digital asset ecosystem at home and abroad, Brian Dees, Director of the National Economic Council, and National Security Adviser Jake Sullivan said in a statement.
Here are some key points from the White House’s new crypto framework.
Part of the White House’s new framework for regulating cryptocurrency focuses on eliminating illegal activity in the industry — and the proposed measures appear to have real teeth.
“The President will assess whether to require Congress to amend the Bank Secrecy Act, anti-fraud legislation, and laws against unauthorized transfer of funds to expressly apply to digital asset service providers — including digital asset exchanges and non-perishable tokens (NFT) platforms,” According to the White House fact sheet.
The president is also looking into whether he will press Congress to lift penalties for transferring unauthorized funds, as well as potentially amending some federal laws to allow the Department of Justice to prosecute digital asset crimes in any jurisdiction where a victim of those crimes is found.
Regarding the next steps, “Treasury will complete the risk assessment of illicit finance on decentralized finance by the end of February 2023 and the assessment of non-fungible tokens by July 2023,” the fact sheet states.
Crime is rampant in the digital asset sector. More than $1 billion worth of cryptocurrency has been lost to fraud since the beginning of 2021, According to research from the Federal Trade Commission.
Last month, the Securities and Exchange Commission said it indicted 11 people for their roles in creating and promoting a fraudulent crypto pyramid and Ponzi scheme that raised more than $300 million from millions of retail investors worldwide, including in the United States. Meanwhile, in February, US officials $3.6 billion worth of Bitcoin seized Biggest Cryptocurrency Seizure Ever – Relates to 2016 Hack of Bitfinex Crypto Exchange.
The framework also points to the potential for “significant benefits” from a US central bank digital currency, or CBDC, which you can think of as a digital form of the US dollar.
At the moment, there are several different types of US digital dollars.
Commercial bank accounts across the country have electronic US dollars, backed in part by reserves, under a system known as the partial reserve banking system. As the name implies, the bank holds in its reserves a small portion of the bank’s deposit obligations. This form of money is transferred from one bank to another or from one country to another according to old financial rules.
There is also a large selection of stablecoins pegged to the US dollar, including tether and the US dollar. Although critics have wondered if Cord still has enough dollar reserves to support its currency The largest stable currency on the planet. US dollar currency supported Through fully booked assets, redeemable on a 1:1 US dollar basis, and governed by the Centre, a consortium of regulated financial institutions. It is also relatively easy to use no matter where you are.
Then there is the virtual digital dollar that the Federal Reserve would make a decision on a central bank digital currency. This will essentially be just a digital twin of the US dollar: fully regulated, under central authority, and with the full faith and support of the country’s central bank.
“The dollar in the form of central bank digital currency is the responsibility of the central bank. The Fed has to repay you,” explained Ronit Goss, who heads Citi Global Insights’ financial and digital assets.
Federal Reserve Chairman Jerome Powell said earlier The main incentive for the United States to launch its own central bank digital currency, or CBDC, will be to eliminate the use case for cryptocurrencies in America.
“You wouldn’t need stablecoins, you wouldn’t need crypto if you had a digital American currency,” Powell said. “I think this is one of the strongest arguments in her favour.”
In the new framework of the White House, this refers to the fact that a US central bank digital currency can enable a payment system that is “more efficient, provides a basis for more technological innovation, facilitates faster cross-border transactions, and is environmentally sustainable.”
“It can advance financial inclusion and equity by enabling access to a broad range of consumers,” the report continues.
To this end, the administration urges the Federal Reserve to continue research, experimentation, and ongoing evaluation of CBD.
US central bankers and lawmakers have long lamented the rise of stablecoins, a specific subset of cryptocurrencies that have a value tied to a real-world asset, such as a fiat currency like the US dollar or a commodity like gold.
These non-governmental digital tokens are increasingly being used for domestic and international transactions, which is frightening for central banks because they have no say in how this space is regulated.
In May, the collapse of TerraUSD, one of the most popular stablecoin projects pegged to the US dollar, It costs investors tens of billions of dollars When they withdrew in a panic some compared it to a bank outflow. Buying spread – general public service announcements -Respectable financial institutions gave credence to the project, adding to the narrative that the whole thing was legitimate.
The internal collapse of this stablecoin project led to a series of bankruptcies that wiped out nearly $600 billion in wealth, according to the White House.
According to the White House fact sheet, “digital assets and the mainstream financial system are becoming increasingly intertwined, creating channels for disruption to have spillover effects.”
The framework continues to define stablecoins, warning that they can create troublesome playbacks if not paired with proper regulation.
To make stablecoins “more secure,” the administration says the Treasury will “work with financial institutions to enhance their ability to identify and mitigate cyber vulnerabilities by sharing information and enhancing a wide range of data sets and analytical tools, as well as collaborating with other agencies” to “identify, track and analyze Emerging strategic risks related to digital asset markets.
These efforts will also take place in coordination with international allies, including the Organization for Economic Co-operation and Development and the Financial Stability Board.
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