Experts from the cryptocurrency and blockchain technology sectors said today they are watching with deep interest for the outcomes of a Biden administration executive order issued in March on the risks and benefits of digital assets in order to gauge the whether the Federal government and Congress will undertake meaningful regulatory changes that would benefit the sectors.
The executive order takes a broad swing at addressing the risks and benefits of digital assets and encourages Federal regulators to consider providing oversight of those assets to guard against systemic financial risks that they might impose. The order, the White House said earlier this year, outlines the “first-ever, whole-of-government approach to addressing the risks and harnessing the potential benefits of digital assets” and the technologies that support them.
In executing on the order’s directives, various Federal agencies will take a look at a wide range of issues including consumer and investor protection; financial stability; illicit finance; leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation.
In particular, the executive order tasks several agencies with exploratory work that could lead to regulatory changes. Among those, the order asks:
- The Treasury Department “to address the implications of the growing digital asset sector and changes in financial markets for consumers, investors, businesses, and equitable economic growth,” and to study related financial stability and systemic risks;
- Various agencies to coordinate risk mitigation and work with allies and partners “to ensure international frameworks, capabilities, and partnerships are aligned and responsive to risks”;
- The Commerce Department “to work across the U.S. Government in establishing a framework to drive U.S. competitiveness and leadership in, and leveraging of digital asset technologies”; and
- The Federal Reserve “to continue its research, development, and assessment efforts” for a U.S. Central Bank Digital Currency (CBDC) “including the development of a plan for broader U.S. Government action in support of their work.”
EO, SEC Impacts
At today’s DC Blockchain Summit event in Washington organized by the Chamber of Digital Commerce, the group’s founder and CEO Perianne Boring said she expects that Federal agency reports stemming from the executive order will be far from the last word on any possible policy changes because the reports likely will call on Congress to take action.
“It’s likely many of [the reports] will have recommendations that Congress needs to put forward,” she predicted.
“As someone who used to work in Congress, I can tell you that’s going to be a multi-year process, so don’t expect significant policy changes this year, this is going to take some time,” Boring said.
Looking across the Federal landscape, she singled out the Securities and Exchange Commission (SEC) as the “number one blocker to this industry, having economic progress, and bringing an economic boom in this country that we haven’t seen in decades.”
Boring said the SEC has been slow to act on a number of fronts that would provide regulatory clarity and stimulate market growth.
“We need a basic definition from the SEC of what is a digital asset security, [and] what’s in your jurisdiction, and what’s not,” she said. “It’s really not a complicated question to answer, but they’ve refused to give guidance … they’ve been dragging their feet on that for years.”
“We need a spot crypto ETF [exchange traded fund]. How can we have futures ETFs but not an equity ETF? It doesn’t make sense and it’s often harming investors in an incredible way,” she said.
On those and other issues, Boring said “there are things that agencies like the SEC can do immediately, but they’ve refused to.”
“Hopefully this executive order will put forward a process and bring Congress into that, but that’s going to take longer than it should,” she said.
Congressional Interest Running High
Meanwhile, Congress isn’t waiting around for the findings of the executive order to get legislation rolling. Speakers at today’s event counted about 40 bills crypto and blockchain-related bills currently pending in Congress.
Rep. Darren Soto, D-Fla., who delivered a keynote address to attendees virtually, talked about two pieces of legislation – the Token Taxonomy Act which aims to keep blockchain technology development in the U.S. – and the Digital Taxonomy Act introduced by Rep. Soto that would direct the Federal Trade Commission (FTC) to report on the agency’s actions related to digital tokens.
One aim of the legislation, he said, is “defining what a digital asset is” within the jurisdictions of various Federal agencies including the SEC, the FTC, and the Commodities Futures Trading Commission (CFTC).
“We’re also working with the Digital Chamber on the Digital Commodity Exchange Act to really hone in on the CFTC being a prime regulator on the exchange,” he said, adding, that’s “something that we applaud the Digital Chamber for working on with us.”
Rep. Soto also applauded the Biden administration “for coming forward with an executive order to put pen to paper for agencies so that we can get the well-needed – and we’ve been waiting for a while – agency input so we could finally get these bills moving.”