With its comprehensive framework for crypto assets, the White House called for a “more aggressive push by regulators to take on fraud in the sector.”
The White House also urged authorities to double down on their efforts to develop the “Digital Dollar,” as it will significantly benefit the country’s financial sector.
The Secretary of the US Treasury, Janet Yellen, that if all the risks that digital assets pose are dealt with, the industry will offer significant opportunities.
The White House has released a first-of-its-kind framework in the US for the “responsible development” of digital assets as 16% of adult Americans own crypto, and its global market capitalization reached $3 trillion at its peak.
Although the user numbers may have come down from the peak, it still holds strong despite the crypto winter, ready to surge again with growing adoption of Web3, DeFi, and NFTs.
The framework calls for a “more aggressive push by regulators to take on fraud in the sector,” based on its nine reports that make recommendations on protecting consumers, investors, financial stability of businesses, the environment, and national security.
Amid Russia Ukraine war, the White House was particularly concerned about sanctioned individuals and entities turning to digital assets to circumvent the sanctions. On top of that, an increasing number of crypto hacks and rug pulls and a considerable drop in the global digital market cap added fire to the fury.
Speaking of hacks, the most notable one that irked the US regulators was a $625 million Ronin Bridge attack, reportedly carried out by a North Korean group known as Lazarus.
What followed next were a series of strict measures by the US government and authorities, the most notable one being the US Department of Treasury’s Office of Foreign Assets Control (OFAC)’s sanctions against Tornado Cash, popular crypto mixing service. Recently, the OFAC also released FAQs in relation to its sanctions against Tornado Cash.
Despite these tough measures, the White House has indicated that although they are concerned about the misuse of cryptocurrencies by malicious elements, they want to “foster responsible digital asset innovation” with the first-of-its-kind digital assets framework. This is also significant as it comes after President Biden issued an executive order in March this year on the oversight of crypto assets.
The report urges the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) to “aggressively pursue” investigations as well as enforcement actions against unlawful practices in the crypto space. In addition, it has asked the Federal Trade Commission (FTC) and Consumer Financial Protection Bureau (CFPB) to double their efforts to monitor consumer complaints and enforce against unfair practices.
Moreover, there are plans to call upon Congress to amend the Bank Secrecy Act to explicitly apply to digital asset service providers, including exchanges and NFT platforms.
The US Treasury is also set to complete an illicit finance risk assessment on DeFi by February 2023 and an evaluation on NFTs by July 2023.
Providing Guidance
The Office of Science and Technology Policy and NSF will be tasked with developing a Digital Assets Research and Development Agenda.
The framework meanwhile encourages the Department of Treasury (DOT) and regulators to provide entities in the crypto space with guidance, best-practice information, and technical assistance.
Janet Yellen, the US Secretary of the Treasury, said that the reports clearly identify the risks and challenges associated with the usage of digital assets for financial services.
So, “if these risks are mitigated, digital assets and other emerging technologies could offer significant opportunities,” she added.
According to her, all the reports on digital assets and their recommendations provide a “strong foundation for policymakers” to realize their potential benefits while minimizing the risks.
As for a digital dollar, the Biden administration said a central bank digital currency (CBDC) could “offer significant benefits” to the US financial system. Besides being environmentally sustainable, facilitating faster cross-border transactions, promoting financial inclusion, and fostering economic growth, the White House said, a US CBDC could also help bolster its status as a global leader and support the effectiveness of sanctions.
The assessment was part of a wide-ranging report on digital assets following the executive order issued earlier this year.
A Treasury Department report published last week on the future of money and payments also advocated for a CBDC, noting a “natural use case” for them.
Industry concerns
Although many from the industry welcomed the White House’s comprehensive framework on digital assets, some criticized it, noting its overt focus on the risks of digital assets, pretty much ignoring all the benefits it offers.
For instance, Binance’s CZ appreciated the framework, tweeting, “It’s great to see the US moving towards a proposed crypto framework. Getting it right will help protect consumers, markets and spark responsible innovation.”
He believes federal regulation will benefit the industry compared to the “current patchwork of state laws and regulations that govern this space.”
Cameron Winklevoss, on the other hand, believes that the framework fails to capture the potential and opportunities that the digital assets landscape presents.
He believes that it focuses too much on the risks that cryptocurrencies pose. Instead, he believes, the focus should have been on providing clear “Rules of the Road” over the current “Regulation by Enforcement” approach.
Some experts also called out the framework over its anti-Proof-of-Work stance and naming all things crypto as a scam or a threat.
So, what do you think about this comprehensive framework for digital assets? Let us know on our social media channels.
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