The White House this month released its first comprehensive framework for the responsible development of digital assets following President Joe Biden’s March 9 executive order. The order called on regulators to assess the industry and develop recommendations to protect investors while promoting innovation. Although more work is needed, the framework is a step in the right direction as it demonstrates the willingness of regulators to provide the industry with much-needed regulatory clarity.
The framework’s recommendations addressed six key areas to protect market players, provide access to financial services and promote innovation. While the Biden administration has focused more on protecting consumers in the industry in the past, it’s encouraging to see the framework focus on all three industry groups — consumers, investors and businesses. The executive quoted a 2018 Wall Street Journal study that showed nearly a quarter of coin offerings had red flags such as plagiarized documents and promises of return on investment. To encourage protection, the framework encouraged regulators to “aggressively prosecute” illegal industry practices, step up enforcement efforts, and increase public outreach efforts to promote education in this area. domain.
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Additionally, the framework provided measures for both the Biden administration and Congress to address illicit finance, such as amending the Bank Secrecy Act, transaction monitoring, and exposure and disruption. illicit actors.
The framework also addressed the promotion of access to safe and affordable financial services. This is one of the main advantages of the cryptocurrency industry, as it has provided access to financial services to millions of people around the world. He mentioned the fact that nearly 7 million Americans do not have a bank account and another 24 million rely on non-bank services, which can be costly. By encouraging payment providers to have increased instant access to payment systems, prioritizing efficient cross-border payments, and supporting research in technological and socio-technological disciplines, the framework can help deliver services financial resources to those in need.
Biden will also consider creating a federal framework to regulate non-bank payment providers, some of which now offer cryptocurrency services. The framework will also ensure financial stability by allowing the Treasury to strengthen the capacity of financial institutions to identify, monitor and analyze emerging strategic risks and to mitigate cyber vulnerabilities.
The recommendations promote the advancement of responsible innovation in digital assets. To do this, Biden is asking the Office of Science and Technology Policy and the National Science Foundation (NSF) to develop a research and development program on digital assets, as well as provide regulatory advice and technical assistance to companies. innovative Americans in the sector. The NSF will also support social science and education to promote safe and responsible use of digital assets.
This is a step in the right direction for regulators as it allows them to first understand both the technological benefits of this technology while tracking the environmental impacts to provide a clear strategy for the industry can move forward. This will allow the United States to strengthen its global financial leadership and competitiveness by helping innovative technologies and digital asset companies to strengthen themselves in international markets, as well as helping foreign and developing countries to develop their infrastructure. of digital assets with US values intact.
The area where the framework has garnered the most resistance relates to the exploration of a US central bank digital currency (CBDC). Although at first glance CBDCs appear to be the best of fiat currencies and cryptocurrencies, the implications can have widespread negative effects. The recommendations note the potential benefits of a US CBDC, such as a more efficient payment system, faster cross-border transactions, and environmental sustainability.
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While these are certainly positives, the main flaw of a CBDC stems from centralization. Having a centralized system governing CBDCs means they are much more easily tracked, have more vulnerable systems compared to Bitcoin’s, and can lead to a potential increase in data breaches.
That said, Biden officials are simply exploring the use case for CBDCs, which means he and his regulators are gathering input to determine the best course of action.
Cryptocurrencies have been around for over a decade. Yet, although the industry is looking to government to provide the regulatory clarity needed to remove much of the uncertainty and doubt, it was only this year that the industry finally received an indication of what to do. what that clarity might look like.
Biden and the regulatory agencies that submitted nine reports to him created the first-ever comprehensive regulatory framework for cryptocurrencies. It is doing a commendable job of targeting areas that need regulation the most and increasing research in that area while listening to market experts which is a great first step can become exactly what the industry needs to continue to grow and innovate without a threat hovering over its shoulder.
Mitesh Shah is the founder and CEO of Omnia Markets, an artificial intelligence company providing expertise on financial analysis, trends and insights into the cryptocurrency industry. He specializes in finance and technology and holds an MBA in finance from St. John’s University-Tobin College of Business, as well as a certificate in machine learning from Stanford University.
This article is for general informational purposes and is not intended to be and should not be considered legal or investment advice. The views, thoughts and opinions expressed herein are those of the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.