(THE PAVLOVIC TODAY) — The nine reports on digital assets have landed on the Resolute Desk, The Pavlovic Today has learned, offering recommendations for “responsible” digital assets framework.

White House National Security Advisor Jake Sullivan in the James S. Brady Press Briefing Room at the White House. (Photo by Erin Scott)

According to the National Economic Council (NEC) Director Brian Deese and National Security Advisor Jake Sullivan, Biden’s “first-ever” digital assets framework is positioning America to “keep playing a leading role” in crypto innovation “in a way that protects consumers, is consistent with our democratic values, and advances US global competitiveness.” 

A White House official told The Pavlovic Today that protecting consumers, investors, and businesses, is “a top priority for President Biden.”

Perianne Boring, Founder and CEO of the Chamber of Digital Commerce, has welcomed the digital assets framework as “an important step in the process of establishing a policy framework” for the crypto industry.

“As the past six months confirmed, and the White House report supports, digital assets play a significant role for investors and will play an increasingly important role for those seeking access to basic financial services,” Boring told The Pavlovic Today. 

“That is why,” Boring continued, “it is crucial for policymakers to take this White House blueprint and work with Congress on the policy framework and guardrails that will create certainty for our industry and investors and encourage greater innovation and adoption.” 

The “highest urgency”: CBDC 

NEC Director Brian Deese and National Security Advisor Jake Sullivan revealed that the President’s directive was to place the “highest urgency” on research and development of a US central bank digital currency (CBDC). 

According to reports, US CBDC “has the potential” to enable a “more efficient” and environmentally sustainable payment system. Experts agree that a potential US central bank digital currency could sustain American global leadership in finance and “support the effectiveness of sanctions.” However, reports warn of “unintended consequences,” including runs to CBDC in times of stress.

Secretary of Agriculture Tom Vilsack looks on as Director of the National Economic Council Brian Deese in the James S. Brady Press Briefing Room at the White House. ( Photo by Erin Scott)

Deese and Sullivan have announced that the Biden Administration is preparing to launch an “interagency working group to support Federal Reserve efforts by considering policy implications of a potential CBDC, especially for our national security.”

The leadership of the Federal Reserve, the National Economic Council, the National Security Council, the Office of Science and Technology Policy, the Treasury Department, and other agencies “will meet regularly to discuss updates and progress.”

Illicit cryptocurrency use

According to FBI, digital asset scams are on the rise and nearly 600% higher in 2021 than in 2020.

NEC Director Brian Deese and National Security Advisor Jake Sullivan revealed that the reports encourage regulators to “scale up” investigations into digital asset market misconduct. Regulators will be expected to redouble their enforcement efforts, and strengthen interagency coordination.

President Joe Biden walks along the West Colonnade of the White House to the Oval Office. (Photo by Cameron Smith)

“The Administration will execute a comprehensive action plan with priority steps to mitigate key risks of cryptocurrencies—among others, money laundering and financing for terrorism. Agencies have developed recommendations to improve our ability to track, trace, and counter illicit cryptocurrency use, and urge further steps to redouble US sanctions enforcement,” NEC Director Brian Deese and National Security Advisor Jake Sullivan hinted at measures the Biden Administration is planning to take against illicit crypto use.

SEC to “aggressively pursue” investigations

MIT Sloan School of Management Professor and former CFTC Chairman Gary Gensler, center, answers questions during a June 18, 2018, hearing of the House Committee on Agriculture on potential federal oversight of cryptocurrencies in Washington. (Photo credit House Agriculture Committee Democratic Staff)
  • The Biden Administration will encourage the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) to “aggressively pursue” investigations and enforcement actions against unlawful practices in digital assets.
  • Consumer Financial Protection Bureau (CFPB) and Federal Trade Commission (FTC) will redouble their efforts in monitoring consumer complaints against unfair, deceptive, or abusive practices.
  • The Financial Literacy Education Commission (FLEC) will help consumers understand the risks involved with digital assets and teach them how to report misconduct.

Digital assets framework: FedNow

The Pavlovic Today has learned that President Biden may create a federal framework to regulate non bank payment providers.

It is crucial for policymakers to take this White House blueprint and work with Congress on the policy framework and guardrails that will create certainty for our industry and investors and encourage greater innovation and adoption.

Perianne Boring

Nearly 24 million Americans rely on costly money orders, for everyday needs and another 7 million is without a bank account. For those who do use banks, cross-border payments can be expensive and take a long time to process.

In 2023, the Federal Reserve will be launching a new 24/7 instant payment service, FedNow.

What will Biden do regarding Stablecoins?

The potential for instability of stablecoins, a type of digital asset generally designed to maintain a stable value relative to the US dollar, was illustrated in May 2022 by the crash of TerraUSD. 

In 2021, Biden’s Working Group on Financial Markets recommended steps for Congress and regulators to make stablecoins “safer.”

According to the White House, the Financial Stability Oversight Council (FSOC) will publish a report in October 2022 on digital assets’ financial-stability risks and regulatory gaps.

The Pavlovic Today was told that the Biden Administration will make the following steps:

  • The Treasury will work with financial institutions to mitigate cyber vulnerabilities.
  • The Treasury will collaborate with the Organization for Economic Co-operation and Development (OECD) and the Financial Stability Board (FSB).

The Bank Secrecy Act (BSA)

  • US agencies will leverage US positions in the G7, G20, OECD, FSB, Financial Action Task Force (FATF), and the International Organization for Standardization to “message US values related to digital assets.”
  • The State Department, the Department of Justice (DOJ), and other US enforcement agencies will increase collaboration with the Egmont Group, and bilateral information sharing.
  • The President will evaluate whether to call upon Congress to amend the Bank Secrecy Act (BSA), anti-tip-off statutes, and laws against unlicensed money transmitting to apply explicitly to digital asset service providers. This will include digital asset exchanges and nonfungible token (NFT) platforms.
  • Biden may urge Congress to raise the penalties for unlicensed money transmitting to match the penalties for similar crimes under other money-laundering statutes and to amend federal relevant laws to let the Department of Justice prosecute digital asset crimes in any jurisdiction where a victim of those crimes is found.
  • Treasury will complete an illicit finance risk assessment on decentralized finance by the end of February 2023 and an evaluation on nonfungible tokens by July 2023.

“We are laying the groundwork for a thoughtful, comprehensive approach to mitigating digital assets’ acute risks and—where proven—harnessing their benefits. We remain committed to working with allies, partners, and the broader digital asset community to shape the future of this ecosystem,” Brian Deese and Jake Sullivan shared the details of the Biden’s first-ever digital assets. framework.

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Ksenija Pavlovic McAteer

Ksenija Pavlovic is the Founder and Editor-in-Chief of the Pavlovic Today, The Chief White House Correspondent. Pavlovic was a Teaching Fellow and Doctoral Fellow in the Political Science department...

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