Christine Docherty

With cryptocurrency and digital assets becoming a popular topic of both mainstream and financial regulatory discussions, and with a rise in cryptocurrency and digital asset activity on the international stage, many have wondered when the United States executive branch would take a public step to promote exploration of the advantages and risks associated with digital assets.  

On March 9, President Joe Biden issued an executive order titled “Executive Order on Ensuring Responsible Development of Digital Assets,” which set forth a series of key objectives with respect to the U.S. government’s exploration of and response to the rising tide of digital currencies and assets, consideration of a central bank digital currency (CBDC) as well as a set of directives and encouragements for various government agencies to explore those key objectives. 

 Consumer Protection, Risk Mitigation 

The first objective set forth in the executive order is the protection of consumers, investors and businesses in the United States, highlighting the inherent risks associated with allowing consumers to interact with digital assets without ensuring that appropriate protective safeguards are in place to prevent, among other things, the misuse or theft of sensitive personal data or financial abuse of vulnerable consumers. 

Kate Henry

The second objective in the executive order acknowledges the systemic risk inherent in a globally-accessible, high-tech system of digital assets and cryptocurrency, especially in light of the exponential growth of these systems that has occurred and will continue to occur as technology develops.  

The executive order goes on to state that “[d]igital 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.” This emphasizes the theory that financial technology companies should be subject to the same oversights as traditional financial companies if the risks associated with those financial technology companies mirror the risks associated with the traditional financial system. 

National Security Concerns Addressed 

Similar to the risks discussed in Key Objective 2, the third objective centers around the national security risks inherent in internationally-accessible digital assets. The executive order underscores the possibility for abuse of an unregulated system of digital assets left vulnerable for use in illicit activities such as money laundering, cybercrime and ransomware without the safeguards provided to prevent such activities in traditional financial institutions. Even with potential safeguards in place in the United States, the executive order highlights the risk associated with “poor or nonexistent implementation” of protective international standards, which “can present significant illicit financing risks for the United States and global financial systems.” 

Armand J. Santaniello

The fourth key objective highlighted by the executive order is the opportunity for the United States to further assert itself as an important leader in financial technology and global financial services generally. The United States’ participation in the global development of cryptocurrency and other digital assets allows the United States to maintain its competitive technological and financial edge amongst other world leaders. By ensuring that it remains a leading voice in the evolving conversation on digital assets, the United States can ensure that key tenants can remain at the forefront of the developing field, including privacy, democratic values, consumer protection and interoperability of digital platforms. 

An additional key objective of the executive order is to promote access to financial services to unbanked and underbanked Americans in a safe and accessible manner. This objective underpins an ongoing conversation from the U.S. executive branch regarding innovative solutions to millions of Americans who lack access to traditional financial markets and resources. The executive order emphasizes that access to an international digital assets

platform should be easily accessible to all Americans, and not just those who also have access to traditional financial markets, and could present a unique opportunity to include traditionally underbanked and unbanked populations in the market. 

Admin Prepared to Take Steps 

The last key objective focuses on ensuring that the development and incorporation of digital asset financial tools and marketplaces is done sustainably and “in a responsible manner that includes privacy and security in their architecture, integrates features and controls that defend against illicit exploitation, and reduces negative climate impacts and environmental pollution, as may result from some cryptocurrency mining.” 

The second half of the executive order focuses on calls to action from President Biden to governmental and regulatory agencies and bodies, primarily with respect to the feasibility and risk associated with implementing a CBDC. It also highlights the need to develop possible pathways to ensure consumer protection, privacy and legal standards with respect to the United States’ increased involvement with digital assets.  

This executive order, as well as the deliverables requested in the executive order, mark the first significant step in exploring the United States’ involvement in the international digital currency space. It is also the Biden administration’s signal that it is prepared to take prudent first steps to explore the possibility of adopting digital assets into the United States’ traditional financial market.