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US Government releases Policy for Cryptocurrency Regulation

Incurs backlash from Crypto supporters.

The US Government under the administration of President Joe Biden, has published the “First-Ever Comprehensive Framework for Responsible Development of Digital Assets.” This release was put out on Friday, 16th September, 2022.

In addition, Biden’s government also issued a March executive order instructing government agencies and sectoral regulators to conduct research on the effects of cryptocurrencies on consumer protection and the risks and benefits of deploying a Central Bank Digital Currency (CBDC).

The framework encourages sectoral regulators such as the Securities and Exchange Commission (SEC) and the Commodities 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) are also urged to “redouble” their monitoring of consumer complaints in the digital assets space.

An additional proposal in the announcement is that there would be cooperation between the White House and Congress to amend federal laws.

The White House will 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 release further adds that federal agencies will “continue to expose and disrupt illicit actors and address the abuse of digital assets”, and that the White House would back payment systems akin to “FedNow”, which the Federal Reserve planned to launch in 2023.

The US Department of the Treasury is now required to complete an “illicit finance risk assessment” on Decentralized Finance by the end of February 2023, and an assessment on Non-fungible Tokens (NFTs) by July 2023.

The Treasury is empowered to lead a working group to “consider the potential implications of a U.S. CBDC, leverage cross-government technical expertise, and share information with partners.”

Crypto users, experts and other executives under the Blockchain Association however, have criticised the POTUS on this threatening move, describing it as a “missed opportunity”.

According to these critics, the Biden administration’s reports focused on environmental concerns over crypto’s energy consumption and illicit uses rather than the technology’s many benefits.

Crypto analyst, Dylan LeClair and MicroStrategy co-founder Michael Saylor both criticized the release, describing it as a pretext for extending its control over digital assets, under the guise of environmental concerns.

The executive director of the U.S.-based Blockchain Association, Kristin Smith, also commented: “Today’s reports and summaries from the Biden administration’s executive order on digital assets are a missed opportunity to cement U.S. crypto leadership. While intended to be part of a broader government and stakeholder effort to bring better regulation to crypto assets, these reports focus on risks — not opportunities — and omit substantive recommendations on how the United States can promote its burgeoning crypto industry.

According to another Crypto expert, Sheila Warren of the Crypto Council for Innovation, the policy seemed to be based on an “outdated and unbalanced understanding of crypto”, which could leave the details to be determined by other lawmakers or the next administration.

It is also worthy of note that the Financial Stability Oversight Council will publish a report in October on the financial-stability risks of digital assets and related regulatory gaps as declared by the White House, and that the Treasury Department will continue to research on the implications of releasing a digital dollar.

 

Sources: Jurist, Cointelegraph.

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