US President Joe Biden’s administration has issued a new executive to regulate cryptocurrencies, asking regulators to ensure sufficient oversight and safeguard against any systemic financial risks posed by digital assets.
Digital assets, including cryptocurrencies, have seen explosive growth in recent years, surpassing a $3 trillion market cap last November and up from $14 billion just five years prior.
Over 100 countries, including India, are exploring or piloting Central Bank Digital Currencies (CBDCs), a digital form of a country’s sovereign currency.
The White House said in a statement on Wednesday that the US must maintain technological leadership in this rapidly growing space, supporting innovation while mitigating the risks for consumers, businesses, the broader financial system, and the climate.
In order to “protect consumers, investors, and businesses”, the order directed “the Department of the Treasury and other agency partners to assess and develop policy recommendations to address the implications of the growing digital asset sector and changes in financial markets for consumers, investors, businesses, and equitable economic growth”.
The executive order encourages “the Financial Stability Oversight Council to identify and mitigate economy-wide (i.e., systemic) financial risks posed by digital assets and to develop appropriate policy recommendations to address any regulatory gaps”.
To mitigate the illicit use of digital assets, the Biden executive order directed “an unprecedented focus of coordinated action across all relevant US Government agencies to mitigate these risks”.
“It also directs agencies to work with our allies and partners to ensure international frameworks, capabilities, and partnerships are aligned and responsive to risks.”
The Secretary of the Treasury, working with all relevant agencies, will produce a report on the future of money and payment systems, to include implications for economic growth, financial growth and inclusion, national security, and the extent to which technological innovation may influence that future, read the executive order.
The order also directed the government to assess the technological infrastructure and capacity needs for a potential US CBDC in a manner that protects Americans’ interests.