Federal Government Issues Order to Focus on Regulating Cryptocurrency
Last month, President Biden issued the anticipated Executive Order, “Ensuring Responsible Development of Digital Assets,” which provides the first-ever, whole-of-government approach to the risks and benefits of digital assets and their underlying technology.
The Order does not set forth any regulations but rather lays out a national policy for digital assets across priority areas. It also outlines a process for the government to gather reports from the digital ecosystem from the more than 20 executive agencies listed in the Order.
What is cryptocurrency?
Cryptocurrency is a digital currency or electronic cash. It first started to appear in the United States in the early 1990s, but its popularity has taken off due to a surge in online business and the ease and unregulated nature of the exchange.
How popular is cryptocurrency?
Digital assets, including cryptocurrency, have seen explosive growth in recent years, surpassing a $3 trillion market cap last November and up from $14 billion just five years prior. Surveys suggest that around 16 percent of adult Americans – approximately 40 million people – have invested in, traded, or used cryptocurrencies. Over 100 countries are exploring or piloting Central Bank Digital Currencies (CBDCs), a digital form of a country’s sovereign currency.
What is the federal government’s recent response to the growth in digital assets?
The government’s approach to digital regulation focuses on six key priorities: consumer and investor protection; financial stability; illicit finances; U.S. leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation.
Specifically, the Executive Order calls for measures to:
- Protect U.S. consumers, investors, and businesses by directing the Department of Treasury and other agency partners to assess and develop policy regulations to address the implications of the growing digital asset sector.
- Protect financial stability and lessen the systemic risk by encouraging the Financial Stability Oversight Council to identify and mitigate risks posed by digital assets and to develop appropriate policy recommendations to address any regulatory gaps.
- Mitigate illicit financial and national security risks posed by the illicit use of digital assets by directing a focus of action across all relevant U.S. government agencies. The Order also directs agencies to work with allies and partners to ensure international frameworks, capabilities, and partnerships are aligned and responsive to risks.
- Promote U.S. leadership in technology and economic competitiveness by directing the Department of Commerce to establish a framework that will serve as a foundation for agencies to integrate this as a priority into their policy, research and development, and operational approaches to digital assets.
- Promote equitable access to safe and affordable financial services. The Secretary of the Treasury, working with all relevant agencies, will produce a report on the future of money and payment systems, to include implications for economic growth, financial growth and inclusion, national security, and the extent to which technological innovation may influence that future.
- Support technological advances and ensure responsible development and use of digital assets by directing government agencies to take steps to study and support technological advances in the development, design, and implementation of digital assets.
The Order encourages the Federal Reserve to continue research, develop, and assess the possibility of a U.S. Central Bank Digital Currency (CBDC) in a manner that protects Americans’ interests.
Michigan laws on cryptocurrency
In addition to existing federal laws, laws prohibiting cryptocurrency financial crimes were enacted in 2020 in Michigan. The legislation states that if a person were to engage in criminal activity with a digital form of currency such as Bitcoin, their actions would be treated as if they were doing it using cash.
Help is available
The business attorneys at O’Reilly Rancilio are ready to help business owners understand the complexities of the law, including the laws governing cryptocurrency. For information, visit our website or call 586-726-1000.