Whitehouse Releases 1st Ever Framework For Cryptocurrency Regulations
Earlier today, the US White House released a framework for Cryptocurrency Regulations. This is the first-ever comprehensive framework from the U.S.A. which sets a directive for various federal agencies in designing cryptocurrency-related regulations in the hopes of bringing about constructive and responsible development in this industry. This framework was published after a six-month long wide-ranging research on digital assets after President Joe Biden signed an executive order in March earlier this year. Neither, the executive order signed earlier this year nor, the comprehensive framework released today speaks about coming up with new legislation. But it does give a better picture of the U.S. government’s approach toward crypto industry regulations.
This new framework points to an outline in which it expects the financial services industry should evolve making it easier for cross-border payments and processes to go about when cracking down on fraudulent activities in the digital asset space. The research conducted by various government agencies before the creation of this 1st edition of this comprehensive framework addressed seven areas of concern mentioned in the executive order. The area of focus are
- Protecting consumers, investors and businesses
- Promoting access to safe and affordable financial services
- Fostering financial stability
- Advancing responsible innovation
- Reinforcing global financial leadership and competitiveness
- Fighting illicit finance
- Exploring a US Central Bank Digital Currency (US CBDC)
This framework is aimed at consolidating the U.S. market’s role as a global frontrunner by encouraging private sector innovation and cooperation on an international level. However, this framework has left a huge vacuum on expected guidelines/ideologies on clear taxation rules when it comes to cryptocurrencies.
This framework is clearly giving a go-ahead to regulatory entities like US S.E.C. and CFTC to continue working together and enforce the law in the crypto space while also sharing data on consumer complaints in the space. The framework facilitates U.S. Treasury to work alongside financial institutions and help identify and mitigate cyber risks by sharing data and analytics. It also gains mainstream access to the market as the Treasury has been tasked with working together with regulatory entities to ensure crypto firms have regulatory guidance.
U.S. Treasury will also extend its role in this area to its allies via international organizations such as OECD (Organization for Economic Co-operation and Development) and FSB (Financial Stability Board). It is expected to complete an illicit finance risk assessment on decentralized finance by end of February 2023 and an assessment on non-fungible tokens by July 2023.
In their bid to counter digital currency’s impact on the US Dollar and reduce the usage of cryptocurrencies in the market, the Federal Reserve is researching a hypothetical digital dollar. In simpler words, a twin to the U.S. Dollar but in form of digital currency — US CBDC. The US Central Bank Digital Currency (US CBDC) will be a fully centralized and regulated alternative and is expected to protect consumers and economic growth while also improving payment systems, providing interoperability with other platforms and aligning with democratic values.
This is targeted towards stablecoins which are often pegged against fiat currencies and stabler assets more commonly towards the U.S. Dollar and gold.
This is considered a favourable move for U.S. lawmakers and central bankers who have always clearly expressed their discontent with the rise of this particular subset of digital currencies. The rise of fiat currency and stable assets pegged cryptocurrencies which were completely outside of the control of these regulatory entities but increasingly used in domestic and international transactions was a nightmare as they had no say in this space whatsoever. The impact of the same increased manyfold when a set of stable currencies crashed earlier this year resulting in a loss worth US$ 600 billion to investors and consumers alike. U.S. President Joe Biden is expected to personally decide if he would call upon Congress to amend the Bank Secrecy Act, Anti Tip-off statues and laws against unlicensed money transmitting which would explicitly apply to digital asset services providers such as crypto exchanges and NFT platforms. The framework also pointed out that there are opportunities to ensure that blockchain technology aligns with “a net zero emission economy and improving environmental justice”.
