"Biden White House just put out a framework on regulating crypto \u2014 here\u2019s what\u2019s in it"

" \n Biden White House just put out a framework on regulating crypto \u2014 here\u2019s what\u2019s in it \n \n\n \n The Biden White House has just released its first-ever framework on what crypto regulation in the U.S. should look like \u2014 including ways in which the financial services industry should evolve to make borderless transactions easier, and how to crack down on fraud in the digital asset space. \n \n\n \n The new directives tap the muscle of existing regulators such as the Securities and Exchange Commission and the Commodity Futures Trading Commission, but nobody\u2019s mandating anything yet. The long-awaited direction from Washington has, however, captured the attention of both the crypto industry as a whole \u2014 and of investors in this nascent asset class. \n \n\n \n The framework follows an executive order issued in March , in which President Joe Biden called on federal agencies to examine the risks and benefits of cryptocurrencies and issue official reports on their findings. \n \n\n \n For six months, government agencies have been working to develop their own frameworks and policy recommendations to address half a dozen priorities listed in the executive order: consumer and investor protection; promoting financial stability; countering illicit finance; U.S. leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation. Together, these recommendations comprise the first, \u201cwhole-of-government approach\u201d to regulating the industry. \n \n\n \n Brian Deese, director of the National Economic Council, and national security advisor Jake Sullivan said in a statement that the new guidelines are meant to position the country as a leader in governance of the digital assets ecosystem at home and abroad. \n \n\n \n Here are some of the key takeaways from the White House\u2019s new crypto framework. \n \n\n \n Fighting illicit finance \n \n\n \n One section of the White House\u2019s new framework on crypto regulation focuses on eliminating illegal activity in the industry \u2014 and the measures proposed appear to have real teeth. \n \n\n \n \u201cThe President will evaluate whether to call upon Congress to amend the Bank Secrecy Act, anti-tip-off statutes, and laws against unlicensed money transmitting to apply explicitly to digital asset service providers \u2014 including digital asset exchanges and nonfungible token (NFT) platforms,\u201d according to a White House fact sheet. \n \n\n \n The president is also looking into whether to push Congress to raise the penalties for unlicensed money transmitting, as well as potentially amending certain federal statutes to allow the Department of Justice to prosecute digital asset crimes in any jurisdiction where a victim of those crimes is found. \n \n\n \n In terms of next steps, \u201cTreasury will complete an illicit finance risk assessment on decentralized finance by the end of February 2023 and an assessment on non-fungible tokens by July 2023,\u201d reads the fact sheet. \n \n\n \n Crime is rife in the digital asset sector. More than $1 billion in crypto has been lost to fraud since the start of 2021, according to research from the Federal Trade Commission . \n \n\n \n Last month, the SEC said it charged 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. \u00a0 Meanwhile, in February, U.S. officials\u00a0 seized $3.6 billion worth of bitcoin \u00a0\u2014 their biggest seizure of cryptocurrencies ever \u2014 related to the 2016 hack of crypto exchange Bitfinex. \n \n\n \n A new kind of digital dollar \n \n\n \n The framework also points to the potential for \u201csignificant benefits\u201d from a U.S. central bank digital currency, or CBDC, which you can think of as a digital form of the U.S. dollar. \n \n\n \n Right now, there are several different types of digital U.S. dollars. \n \n\n \n Sitting in commercial bank accounts across the country are electronic U.S. dollars, which are partially backed by reserves, under a system known as fractional-reserve banking. As the name implies, the bank holds in its reserves a fraction of the bank\u2019s deposit liabilities. Transferring this form of money from one bank to another or from one country to another operates on legacy financial rails. \n \n\n \n There are also a spate of USD-pegged stablecoins, including Tether and USD Coin. Although critics have questioned whether tether has enough dollar reserves to back its currency, it remains the largest stablecoin on the planet . USD Coin is backed by fully reserved assets, redeemable on a 1:1 basis for U.S. dollars, and governed by Centre, a consortium of regulated financial institutions. It is also relatively easy to use no matter where you are. \n \n\n \n Then there\u2019s the hypothetical digital dollar that would be the Federal Reserve\u2019s take on a CBDC. This would essentially just be a digital twin of the U.S. dollar: Fully regulated, under a central authority, and with the full faith and backing of the country\u2019s central bank. \n \n\n \n \u201cA dollar in CBDC form is a liability of the central bank. The Federal Reserve has to pay you back,\u201d said Ronit Ghose, who heads fintech and digital assets at Citi Global Insights. \n \n\n \n Federal Reserve Chair Jerome Powell previously said the main incentive for the U.S. to launch its own central bank digital currency would be to eliminate the use case for crypto coins in America. \n \n\n \n \u201cYou wouldn\u2019t need stablecoins; you wouldn\u2019t need cryptocurrencies, if you had a digital U.S. currency,\u201d Powell said. \u201cI think that\u2019s one of the stronger arguments in its favor.\u201d \n \n\n \n In the White House\u2019s new framework, it points to the fact that a U.S. CBDC could enable a payment system that is \u201cmore efficient, provides a foundation for further technological innovation, facilitates faster cross-border transactions, and is environmentally sustainable.\u201d \n \n\n \n \u201cIt could promote financial inclusion and equity by enabling access for a broad set of consumers,\u201d continues the report. \n \n\n \n To that end, the administration urges the Fed to continue its ongoing research, experimentation and evaluation of a CBDC. \n \n\n \n Safeguarding financial stability \n \n\n \n Central bankers and U.S. lawmakers have for years bemoaned the rise of stablecoins, a specific subset of cryptocurrencies that have a value pegged to a real-world asset, such as a fiat currency like the U.S. dollar or a commodity like gold. \n \n\n \n These nongovernmental digital tokens are increasingly being used in domestic and international transactions, which is scary for central banks because they don\u2019t have a say in how this space is regulated. \n \n\n \n In May, the collapse of TerraUSD, one of the most popular U.S. dollar-pegged stablecoin projects, cost investors tens of billions of dollars as they pulled out in a panic that some have compared to a bank run. Widespread buy-in \u2014 and public PSAs \u2014 from respected financial institutions lent credibility to the project, further driving the narrative that the whole thing was legit. \n \n\n \n The implosion of this stablecoin project led to a series of insolvencies that erased nearly $600 billion in wealth, according to the White House. \n \n\n \n \u201cDigital assets and the mainstream financial system are becoming increasingly intertwined, creating channels for turmoil to have spillover effects,\u201d according to the White House fact sheet. \n \n\n \n The framework goes on to single out stablecoins, warning that they could create disruptive runs if not paired with appropriate regulation. \n \n\n \n To make stablecoins \u201csafer,\u201d the administration says the Treasury will \u201cwork with financial institutions to bolster their capacity to identify and mitigate cyber vulnerabilities by sharing information and promoting a wide range of data sets and analytical tools,\u201d as well as team up with other agencies to \u201cidentify, track, and analyze emerging strategic risks that relate to digital asset markets.\u201d \n \n\n \n Those efforts will also happen in concert with international allies, including the Organization for Economic Cooperation and Development and the Financial Stability Board. \n "

"Biden White House just put out a framework on regulating crypto \u2014 here\u2019s what\u2019s in it"

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