U.S. State authorities strive to oversee the crypto industry. September 16 was marked with an issue of a first-ever comprehensive framework for the responsible development of digital assets in the USA. What are the document’s highlights and why might it be far-reaching for the dynamics of the crypto economy?
- On March 9, U.S. President Joe Biden issued a first-of-its-kind executive order (EO) directing federal agencies to integrate efforts to oversee the crypto industry and to draw reports on cryptocurrency regulation.
- In the order, the volatility of digital assets was proclaimed as one of the main risks for investors, yet promoting further development of digital assets and CBDC technologies ‘‘consistent with U.S. values and legal requirements’’ was named a top priority.
- On September 16, the framework for regulating the cryptocurrency industry was released. It therefore coordinated and summarized the results of the work of respective state agencies over the past six months. The document became the first comprehensive framework for managing the digital assets space in the USA.
- The reports presented in the framework are meant to develop respective frameworks and policy recommendations that address and propel the six key priorities identified in the EO. These comprise consumer, investor, and business protection; promoting financial stability and access to safe services; countering illicit finance; reinforcing U.S. leadership in the global financial system and economic competitiveness; responsible innovation.
- According to the press release, the nine reports submitted to the President address the future of money and payment systems, ’’reflect the input and expertise of diverse stakeholders across government, industry, academia, and civil society’’ and altogether ‘’articulate a clear framework for responsible digital asset development and pave the way for further action at home and abroad’’.
- With the global cryptocurrency market cap exceeding $3 trillion in November 2021, U.S. Administration had but to take these numbers into account and consider crypto potential opportunities to reinforce U.S. leadership in the global financial system and remain at the technological frontier. At the same time, as admitted in the report, cryptocurrency also poses real risks to the funds of investors and customers, as evidenced by May’s stablecoin collapse and other recent events in the global crypto market.
- The document in broad terms sets out many initiatives, including potentially restrictive ones, such as the amendments to the Bank Secrecy Act (BSA), which will tighten law enforcement on providers of services related to digital assets.
- Following the example of over 100 countries already using central bank digital currency (CBDC), among which Japan, Russia, India, and South Korea, the framework directed state agencies to conduct research on consumer privacy and protection, energy consumption, as well as explore perquisites and dangers of implementing the CBDC system.
- The reports also address private sector companies, calling for driving innovation closer and helping innovative firms in the USA take hold in the international market.
- So far, about 40 million U.S. citizens, per the report, have invested, traded, or used cryptocurrencies at least once. This equals approximately 16% of the adult population of America. In this regard, the report urges establishing extensive and reasonable standards for cryptocurrency mining.
- The framework apparently received controversial responses and mixed reactions. For instance, Changpeng Zhao, the Head of the Binance cryptocurrency exchange, welcomed the decision, while noting that consistency and clarity of crypto regulation policies are absolutely necessary for the successful development of the industry: ‘’The correct regulations will drive technological innovation and preserve crypto’s fundamental value propositions of freedom and empowerment while ensuring the right guardrails are in place for consumer protection and choice’’.
- Some of the reports presented caused quite negative concerns. Michael Saylor, the co-founder of MicroStrategy, a U.S. company providing business intelligence, software, and cloud-based services, claimed on Twitter: ‘’The latest White House Crypto Climate & Energy Report is full of misinformation generated and promulgated by unscrupulous crypto promoters in order to undermine #Bitcoin and champion their own interests’’.
- Others, such as the Head of Messari, a crypto intelligence product provider, mocked the relevance of such an all-sorts-innovative initiative coming from an elderly president who barely has a ‘’chance of grokking how important this tech is to the future of the US economy’’: ‘’We need a new, younger president, and should be looking for techno-progressives and pragmatic conservatives who will champion common sense solutions in this realm’’.