Executive Order 14066
Today the American President Joe Biden signed into effect an Executive Order to “ensure responsible development of digital assets”. What is an Executive Order and what does this mean for cryptocurrencies and other digital assets in the United States (US)? An Executive Order is a signed, written, and published directive from the President of the US that manages operations of the federal government. As for the impact of this Executive Order in particular, let’s take a deep look into what it details.
The Policy
Joe Biden deemed it necessary to regulate digital assets after they have seen incredible growth, especially in recent years. Digital assets have surged past a $3 trillion market cap as of November 2021 with $14 billion of that coming from just the last five years alone. On top of that surveys have shown that roughly 16% of American adults are invested in some form of digital assets, which equates to roughly 40 million people. The US claim that this rise creates opportunities for individuals to take advantage of these assets in order to cause harm. Such as scamming consumers, threatening financial stability, national security, and climate risk to name a few. The US government states that they must maintain technological leadership in the rapidly growing space of digital assets. Maintaining that they support innovation while trying to mitigate risk for the consumers and the broader financial system. They state that because of this they must play a leading role in international engagement and global governance of these digital assets as to be true to the democratic values of the US global competitiveness. Today, March 9, 2022, Joe Biden signed this Executive Order that lays the framework for the first-ever whole of government approach to addressing these specific risks that they claim are inherently part of the digital asset space.
Objectives of the Executive Order:
First and foremost, Joe Biden's administration continue with their claim that this is for the betterment of the people and for their overall protection. Stating that “we must protect consumers, investors, and businesses in the US”. Fearing that if protections are not in place, then firms providing digital asset services may not provide protections adequate enough to safeguard the sensitive financial data, assets, funds, and disclosures of risk associated with investing. Stating that cybersecurity and market failures at major digital asset exchanges and trading platforms have been resultant in losses upwards of multiple billions of dollars.
Secondly, they claim that they must protect the US and global financial stability while also mitigating systemic risks. They are addressing the fact that some digital asset trading platforms have grown very rapidly in both size and complexity and have not equally scaled their regulations and supervision. They then go on to say that “digital asset issuers, exchanges and trading platforms, and intermediaries whose activities may increase risks to financial stability, should, as appropriate, be subject to and in compliance with regulatory and supervisory standards that govern traditional market infrastructures and financial firms”. Then laying the blanket statement that these new and unique uses/functions of digital assets may create further economic and financial risks requiring even more regulation to “adequately address those risks”.
Next on the list, the mitigation of illicit finance and national security risks posed by the misuse of digital assets. Here they are alluding to the criminal acts of money laundering, cybercrime, ransomware, narcotics, human trafficking, terrorism, and proliferation financing. Proliferation financing is the act of providing funds or financial services which are then used to either manufacture, acquire, possess, develop, export, transport, broker, or otherwise stockpile nuclear, chemical, or biological weapons. The administration is also concerned that digital assets could be used to circumvent financial sanctions.
The US must reinforce its leadership in the global financial system as well as in technological and economic competitiveness. They hope to achieve this through development of payment platforms for digital assets. Stating that they want to remain at the forefront of the development of this payment platform and flow of capital in the international financial system, with emphasis on setting standards that they claim promote democratic values, the rule of law, privacy, protection of consumers, investors, businesses, interoperability with digital platforms, legacy, architecture, and current fiat international payment systems.
Finally, the US has interests in ensuring that these digital asset technologies and the digital payment platforms that are developed in parallel are designed, developed, and implemented in a “responsible” manner. This includes privacy and security inherent within their software and integrates features and controls that specifically defend against illegal exploitation and reduction of negative climate impacts and environmental pollution through their use.
The Executive Order also emphasized that the US will begin exploring a US Central Bank Digital Currency (CBDC). This will be done by placing urgency on research and development of potential US CBDC, should this be deemed in the national interest. This order specifically calls for the US government to actively assess the technological infrastructure and capacity needs for a CBDC that protects American interests. While also encouraging the Federal Reserve to continue its research and development of a US CBDC and prioritizes US participation in multi-country experimentation, while ensuring US leadership remains intact internationally.
This Executive Order sets in motion many departments of the US government to compile evidence and develop a system that safeguards consumers and bolsters the security of digital assets and their platforms in which they work. This order also marks the beginning of the US government’s strategy to develop and implement their own digital currency, which is big news whether good or bad. Only time will tell. In the coming days, weeks, and months we will slowly start to see the true impact of this order and how it will change how we all interact with cryptocurrencies and other digital assets.
References:
Americanbar.org. (n.d.). Retrieved March 9, 2022, from https://www.americanbar.org/groups/public_education/publications/teaching-legal-docs/what-is-an-executive-order-/
Biden Signs Executive Order on government oversight of cryptocurrency; details here. OrissaPOST. (2022, March 9). Retrieved March 9, 2022, from https://www.orissapost.com/biden-signs-executive-order-on-government-oversight-of-cryptocurrency-details-here/
The United States Government. (2022, March 9). Executive order on ensuring responsible development of Digital assets. The White House. Retrieved March 9, 2022, from https://www.whitehouse.gov/briefing-room/presidential-actions/2022/03/09/executive-order-on-ensuring-responsible-development-of-digital-assets/
The United States Government. (2022, March 9). Fact sheet: President Biden to sign Executive Order on ensuring responsible development of Digital assets. The White House. Retrieved March 9, 2022, from https://www.whitehouse.gov/briefing-room/statements-releases/2022/03/09/fact-sheet-president-biden-to-sign-executive-order-on-ensuring-responsible-innovation-in-digital-assets/
What is proliferation financing? gfiu.gov.gi. (n.d.). Retrieved March 9, 2022, from https://www.gfiu.gov.gi/what-is-proliferation-financing
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