There are ways in which the financial services industry should evolve to make borderless transactions easier and how to crack down on fraud in the digital asset space that have been included in the framework released by the Biden White House.
Existing regulators such as the Securities and Exchange Commission and the Commodity Futures Trading Commission are still in charge of the directives. The direction from Washington has captured the attention of both the industry and investors.
President Biden called on federal agencies to look at the risks and benefits of cryptocurrencies in an executive order in March.
Government agencies have been working to develop their own frameworks and policy recommendations to address half a dozen priorities listed in the executive order.
Brian Deese, Director of the National Economic Council, and Jake Sullivan, National Security advisor, said in a statement that the new guidelines are meant to position the country as a leader in governance of the digital assets.
The White House has a new framework for using cryptocurrencies.
The White House wants to eliminate illegal activity in the industry in one of the sections of the framework.
The President may ask Congress to amend the Bank Secrecy Act, anti-tip-off statutes, and laws against unlicensed money transmitting to apply explicitly to digital asset service providers.
The president is considering pushing Congress to raise the penalties for unlicensed money transmission, as well as possibly amending federal statutes to allow the Department of Justice to prosecute digital asset crimes in any jurisdiction where a victim of those crimes is found.
According to the fact sheet, the Treasury will complete an illegal finance risk assessment by the end of February and an assessment on non-fungible token by July of the following year.
There is a lot of crime in the sector. According to research from the Federal Trade Commission, more than a billion dollars has been lost to fraud in the past year.
The SEC charged 11 people for their roles in creating and promoting a Ponzi scheme that raised more than $300 million from millions of retail investors around the world. In February of this year, the U.S. government seized the largest amount of Cryptocurrencies ever, due to the hack of Bitfinex.
The potential for significant benefits from a U.S. central bank digital currency can be seen in the framework.
There are different types of dollars.
There are electronic U.S. dollars in commercial bank accounts that are partially backed by reserves. A fraction of the bank's deposits are held in the bank's reserves. Money can be transferred from one bank to another or from one country to another.
There are a number of stable coins that are pegged to the US dollar. Critics have questioned whether tether has enough dollars to back its currency, but it is still the largest stable coin on the planet. No matter where you are, it's easy to use.
There is a hypothetical digital dollar that the Federal Reserve could use. The digital twin of the U.S. dollar would be fully regulated and backed by the country's central bank.
The central bank has a liability with a dollar in it's form. Ronit Ghose is the head of digital assets for Citi Global Insights.
Powell said that the main incentive for the U.S. to launch its own central bank digital currency was to eliminate the use case forCryptocurrencies in America.
If you had a digital U.S. currency, you wouldn't need stable coins. One of the strongest arguments in its favor is that.
The White House says that a U.S.CBDC could enable a payment system that is more efficient, provides a foundation for further technological innovation, facilitates faster cross-border transactions, and is sustainable.
The report states that it could promote financial inclusion and equity by allowing access for a broad group of consumers.
The administration wants the Fed to continue its research and evaluation of aCBDC.
The rise of stable coins, a subset of cryptocurrencies that have a value pegged to a real-world asset like the U.S. dollar or a commodity like gold, has been decried by central bankers for years.
It is scary for central banks because they don't have a say in how this space is regulated.
The collapse of TerraUSD cost investors tens of billions of dollars as they pulled out in a panic that some have compared to a bank run. The whole thing was legit because of the widespread buy-in and public PSAs from respected financial institutions.
According to the White House, the implosion of the stable coin project wiped out $600 billion in wealth.
The White House fact sheet states that digital assets and the mainstream financial system are becoming increasingly intertwined.
Stable coins are warned that they could create disruptive runs if not regulated.
The Treasury will work with financial institutions to bolster their capacity to identify and mitigate cyber vulnerabilities by sharing information and promoting a wide range of data sets and analytical tools.
In concert with international allies, those efforts will happen.
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