White House Guidelines On Responsible Digital Asset Development
Over the last century, the US has been leading the world in technological innovation. A robust regulatory framework is imperative given the high adoption of digital assets amongst the citizens and businesses of the United States. The White House report shows that 16% of Americans have bought digital assets. Digital assets are helping the United States to reinforce its dominance in the global financial market, reflected in the White House report.
Several changes have come about in the digital space since President Biden released an executive order on responsible digital asset development on March 9th. The US government is working with several agencies and has addressed issues in a report of September 16th, 2022. These policy recommendations and frameworks address six key areas.
- Consumer and investor protection
- Ensuring financial stability
- Financial Inclusion
- Countering illicit finance
- Responsible Innovation
- US leadership in global markets
Consumer and investor protection
The crypto market capitalization has dropped one-third of its value since November 2021. Crypto markets are more volatile compared to the real estate and equity markets. Additionally, non-compliance with laws is more rampant in the crypto market. According to the report, roughly one-fourth of the initial coin offerings have issues with transparency. The administration has decided to take some steps to fight these issues.
- The administration will encourage regulatory agencies like the CFTC and SEC to aggressively pursue investigations into illegal activities.
- The administration will also encourage the Consumer Financial Protection Bureau (CFPB) to increase its efforts to fight abusive, unlawful, and deceptive practices.
- The report also suggests more guidelines to address the risks to investors. Regulatory and legal authorities should cooperate to resolve issues quickly.
- Financial Literacy Education Commission (FLEC) will take responsibility for more public awareness. These awareness campaigns will help users to understand the risks involved in investing in the digital asset space.
Promoting safe and affordable financial services
Currently, 7 million Americans do not possess a bank account. Additionally, 20 million people rely on expensive non-bank financial services for daily activities. Banking services are costly for those not within the formal banking system. These expenses increase further in the case of cross-border payments. The Federal Bank is about to launch FedNow, an instantaneous nationwide payments system. They will also use the clearing house’s real-time payment system.
To promote affordability and safety in financial transactions.
- The president will consider recommendations from all stakeholders to manage non-bank financial services.
- Government institutions will promote the use of instant payments. They will also support the growth of technologies from service providers.
- The report also focuses on cross-border payments. There will be more efforts to improve cross-border payment practices, regulations, and monitoring of protocols.
- The report states that the National Science Foundation (NSF) will conduct more socio-economic research. This initiative will ensure the digital asset ecosystem is designed to be inclusive, usable, equitable, and accessible.
Almost $600 billion of investor wealth was wiped out after the fall of Terra Luna and the following large-scale insolvency. The Biden-Harris administration has recognized the need to address volatility issues in the digital asset space.
- The US Treasury will work with other financial institutions to fight loopholes in the cyber security space.
- The US Treasury will work with other institutions to study and track the risks associated with the digital asset market. To further this cause, the Treasury will work with the Financial Stability Board and OECD.
The US government plans to take some steps to create an environment for responsible innovation.
- To encourage research in the areas of privacy and cyber security, the US govt is working on introducing a new agenda. The focus of this initiative is not just research but also education.
- The government also plans to introduce regulatory guidelines for companies in the digital asset space.
- The report also states that organizations like the Dept. of Energy and the Environmental Protection Agency will study the ecological impact of digital assets.
- The US Department of Commerce is planning a standing forum for stakeholders to discuss ideas.
Fighting illegal finance
There is a need to monitor the use of digital assets as decentralization removes financial intermediaries.
- President Biden is planning to call on Congress to change the Bank Secrecy Act (BSA) to protect against unlawful money transfers of digital assets. NFT platforms and crypto exchanges will come under this act.
- The report states that there will be continuous monitoring of the digital asset space and the risks that come with digital assets to funding unlawful activities.
- US law enforcement agencies will continue to work to catch illegal actors.
- US agencies will have more conversations with private companies to ensure they understand possible threats of illegal activity.
US leadership in global financial markets
The United States will continue to lead in shaping the global economy by actively consulting and framing regulations for the digital asset space. The US government also wants to work with other countries to consider a few factors when they frame regulations in the digital asset space. The US wants countries to consider factors like human rights, data privacy, and financial stability when they frame regulations for digital assets. The US government aims to do this by taking the following steps.
- Leveraging its position in international forums like G-20, OCED, FSB, etc.
- There are plans for the Justice Department and other US agencies to collaborate with their foreign counterparts.
- The US state departments will help other countries with the technical aspects on the legal and regulatory fronts.
- The US government also wants to help American companies expand globally.
The US is also researching and developing its central bank digital currency (CBDC). The Biden administration is also working on policy objectives for the CBDC.
The frameworks created by the US government clearly show the positive outlook of the government to help the digital asset space to grow. This industry will grow harmoniously if the US government works with other stakeholders using a consultative and participatory approach. This approach will be vital as other countries will also follow the path taken by the US government.
You can know more about regulatory updates in the Crypto space on ZebPay blogs.