November 2022 Foodman Website and JD Supra
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President Biden’s Executive Order (EO) on Ensuring Responsible Development of Digital Assets was signed on 3/9/22 acknowledging how the rise in digital assets creates an opportunity to reinforce the leadership of the U.S. in the global financial system as well as its implications for consumer protection, financial stability, national security, and climate risk.  On 9/16/22, the White House followed up by publishing the FACT SHEET:  White House Releases First-Ever Comprehensive Framework for Responsible Development of Digital Assets.  The Fact Sheet is a summary of 9 separate reports of which only 3 have been released* which pave the way for the first ever comprehensive framework for digital assets as well as for further action in the U.S. and abroad.  The 9 separate reports were issued by an Interagency process across the U.S. government that have worked together to develop frameworks and policy recommendations for digital assets.  In sum, the Executive Order calls for a “Holistic Approach” involving all the moving parts of the U.S. Government making it clear that ensuring responsible innovation in digital assets call for Teamwork. In sum, it is evident that regulation and oversight of digital assets is brewing as evidenced by the blueprint presented in the digital asset framework.

Interagency Process is embodied by:

Secretary of State, the Secretary of the Treasury, the Secretary of Defense, the Attorney General, the Secretary of Commerce, the Secretary of Labor, the Secretary of Energy, the Secretary of Homeland Security, the Administrator of the Environmental Protection Agency, the Director of the Office of Management and Budget, the Director of National Intelligence, the Director of the Domestic Policy Council, the Chair of the Council of Economic Advisers, the Director of the Office of Science and Technology Policy, the Administrator of the Office of Information and Regulatory Affairs, the Director of the National Science Foundation, the Administrator of the United States Agency for International Development,  representatives of the Board of Governors of the Federal Reserve System, the Consumer Financial Protection Bureau (CFPB), the Federal Trade Commission (FTC), the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and other Federal regulatory agencies.

The Agencies focused on the six key priorities identified in the EO:

  • Consumer and investor protection
  • Promoting financial stability
  • Countering illicit finance
  • U.S. leadership in the global financial system and economic competitiveness
  • Financial inclusion
  • Responsible innovation

Some of the Fact Sheet highlights are:

  • The Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC to aggressively pursue investigations and enforcement actions against unlawful practices in the digital assets space.
  • The Consumer Financial Protection Bureau (CFPB) and Federal Trade Commission (FTC) to redouble their efforts to monitor consumer complaints and to enforce against unfair, deceptive, or abusive practices.
  • Agencies to issue guidance and rules to address current and emergent risks in the digital asset ecosystem. Regulatory and law enforcement agencies are also urged to collaborate to address acute digital assets risks facing consumers, investors, and businesses. In addition, agencies are encouraged to share data on consumer complaints regarding digital assets.
  • The Treasury will work with financial institutions to bolster their capacity to identify and mitigate cyber vulnerabilities by sharing information and promoting a wide range of data sets and analytical tools.
  • The Treasury will work with other agencies to identify, track, and analyze emerging strategic risks that relate to digital asset markets. It will also collaborate on identifying such risks with U.S. allies, including through international organizations like the Organization for Economic Co-operation and Development (OECD) and the Financial Stability Board (FSB).
  • The State Department, the Department of Justice (DOJ), and other U.S. enforcement agencies will increase collaboration with—and assistance to—partner agencies in foreign countries through global enforcement bodies like the Egmont Group, bilateral information sharing, and capacity building.
  • President Biden 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—including digital asset exchanges and nonfungible token (NFT) platforms. President Biden will also consider urging Congress to raise the penalties for unlicensed money transmitting to match the penalties for similar crimes under other money-laundering statutes and to amend relevant federal statutes to let the Department of Justice prosecute digital asset crimes in any jurisdiction where a victim of those crimes is found.

The Fact Sheet encourages ongoing efforts towards the “CBDC”

Exploring a U.S. Central Bank Digital Currency (CBDC) – or a digital form of the U.S. dollar – continues to be a priority for the Administration by encouraging the Federal Reserve to continue its ongoing CBDC research, experimentation, and evaluation.  According to the Fact Sheet, the CBDC has the potential to offer benefits: “It could enable a payment system that is more efficient, provides a foundation for further technological innovation, facilitates faster cross-border transactions, and is environmentally sustainable. It could promote financial inclusion and equity by enabling access for a broad set of consumers. In addition, it could foster economic growth and stability, protect against cyber and operational risks, safeguard the privacy of sensitive data, and minimize risks of illicit financial transactions.”

The US Department of Justice (DOJ) simultaneously announced on 9/16/22 significant actions regarding digital assets, including the public release of its report: “The Role of Law Enforcement in Detecting, Investigating, and Prosecuting Criminal Activity Related to Digital Assets” and the launch of a Nationwide Network – Digital Asset Coordinator (DAC) Network.  The DAC will be led by the department’s National Cryptocurrency Enforcement Team (NCET) and will count with over 150 designated federal prosecutors from U.S. Attorneys’ Offices and across the department’s litigating components and will serve as the department’s primary forum for prosecutors to obtain and disseminate specialized training, technical expertise, and guidance about the investigation and prosecution of digital asset crimes.

Bottom line

The regulation for digital assets is coming and law enforcement will have a role in the detection, investigation and prosecution of any criminal activity related to digital assets.  All parties involved in the digital asset world ought to stay informed and understand that changes are coming.

What will these changes mean to you?  Who is your digital asset expert?  ©