Following President Joe Biden’s March 9 executive order, the White House this month released its first comprehensive framework for the responsible development of digital assets. The order requires regulators to assess the industry and make recommendations to protect investors while promoting innovation. While more work needs to be done, the framework is a step in the right direction, as it demonstrates the willingness of regulators to provide the industry with the much-needed regulatory clarity it seeks.
This framing recommendations Six key areas of protecting market participants, providing financial services and fostering innovation are addressed. While the Biden administration has focused more on protecting consumers in the industry in the past, it is encouraging to see the framework focus on all three groups in the industry — consumers, investors, and businesses. The framework cites a 2018 Wall Street Journal Research shows that nearly a quarter of token offerings have red flags such as plagiarized documentation and promises of return on investment. To encourage protections, the framework encourages regulators to “aggressively pursue” illegal practices in the industry, double down on enforcement, and increase advocacy efforts to promote education in the field.
Additionally, the framework provides the Biden administration and Congress with steps to combat illicit finance, such as amending the Bank Secrecy Act, monitoring transactions, and uncovering and disrupting illicit actors.
The framework also discusses promoting access to safe and affordable financial services. This is one of the major positives for the cryptocurrency industry as it provides financial services to millions of people around the world. It mentions that nearly 7 million Americans are unbanked and another 24 million rely on unbanked services, which can be expensive.By encouraging payment providers to increase instant access to payment systems, prioritizing the efficiency of cross-border payments, and supporting research in technical and socio-technical disciplines, the framework can help provide much-needed Provide financial services to those in need.
Biden would also consider creating a federal framework to regulate non-bank payment providers, some of which now offer cryptocurrency services. The framework will also provide financial stability by enabling Treasury to enhance the ability of financial institutions to identify, track and analyze emerging strategic risks and mitigate cyber vulnerabilities.
These recommendations facilitate the advancement of responsible innovation in digital assets. Biden does this by having the Office of Science and Technology Policy and the National Science Foundation (NSF) set the digital asset research and development agenda, as well as providing regulatory guidance and technical assistance to U.S. innovative companies in the industry. NSF will also support social science and education to promote safe and responsible use of digital assets.
For regulators, this is a step in the right direction, as it allows them to first understand the technical benefits of this technology, while tracking the environmental impact in order to provide a clear strategy for the industry moving forward. This will allow the United States to strengthen its global financial leadership by helping innovative technology and digital asset companies become stronger in international markets, and by helping foreign and developing countries build their digital asset infrastructure to keep American values intact. Competitiveness.
The areas where the framework has faced the most resistance has to do with exploring the U.S. Central Bank Digital Currency (CBDC). While on the surface a CBDC may appear to be the best of both fiat and cryptocurrencies, its impact could have widespread negative repercussions. The recommendations point to potential benefits of a U.S. CBDC, such as more efficient payment systems, faster cross-border transactions, and environmental sustainability.
While these are certainly positives, the main flaw of a CBDC stems from centralization. Having a centralized system for managing CBDCs means they are easier to track, have a more vulnerable system than Bitcoin, and could lead to a potential increase in data breaches.
Having said that, Biden officials are only exploring use cases for CBDCs, which means he and his regulators are gathering feedback to determine the best course of action.
Cryptocurrencies have been around for over a decade.However, while the industry hopes the government Provide regulatory clarity Much of the uncertainty and doubt needs to be removed, and it wasn’t until this year that the industry finally received an indication of what that clarity might look like.
Biden and the regulators who have submitted nine reports to him have created the first-ever comprehensive regulatory framework for cryptocurrencies. It does a commendable job targeting areas that need regulation most, and by increasing research into that area and hearing from market experts, a great first step can be what the industry needs to continue to grow and innovate without an imminent threat.
Mites Shah is the founder and CEO of Omnia Markets, an artificial intelligence company that provides expertise in financial analysis, trends and insights in the cryptocurrency industry. Specializing in finance and technology, he holds an MBA in Finance from St. John’s University’s Tobin School of Business, and a Certificate in Machine Learning from Stanford University.
This article is for general informational purposes only and is not intended and should not be considered legal or investment advice. The views, thoughts and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.