Crypto: White House Releases Regulatory Framework

The adoption of cryptocurrencies is becoming more widespread over time. Now even major sporting events are sponsored by companies like crypto.com. The more this trend increases, the more regulators rush to take action. For example, SEC chairman Gary Gensler said cryptocurrencies may be subject to federal securities regulation. Now the Biden administration is defining a regulatory framework that outlines key future guidelines.

A potential digital dollar under study

President Biden has asked federal agencies to examine the risk-benefit balance of cryptocurrencies. The aim is then to arrive at conclusions that serve as a working basis for the legislator. The regulatory framework released by the White House is in response to these findings. So far, the US stance on central bank digital currencies (CBDCs) has not been explicit. With this recent release, the Biden administration appears poised to move one step closer to a national digital currency.

The Federal Reserve continues to research, experiment and evaluate digital dollar bonds. Such an initiative could enable a more efficient payment system and lay the foundation for new technological innovations. The project would enable faster cross-border transactions and would be environmentally sustainable (recent example with the Merge of the Ethereum blockchain). However, political issues remain regarding such approval. Balancing the national interest is a sine qua non for the creation of a digital dollar.

CBDCs: A Potential Threat to Stablecoins

The Federal Reserve chairman has previously said that the main incentive for the United States to launch its own CBDC would be to eliminate the use of cryptos. Jerome Powell added that there would therefore no longer be a need for stablecoins or cryptocurrencies. Stablecoins were on the radar of UST crash controllers of the Terra ecosystem. The framework points out that if said asset class is unregulated, it could be problematic for investors.

The text indicates that digital assets and the traditional financial system are increasingly correlated. Therefore, volatility can have a snowball effect with a significant impact on investors’ capital. To make stablecoins more secure, the US government is looking to partner with financial institutions to increase their ability to identify and mitigate cyber vulnerabilities by sharing information and promoting a wide variety of data sets and analytical tools.

CBDCs: a brake on illegal activity?

In addition to curbing stablecoin adoption, the White House’s stated goal is that of currency control. Money laundering via cryptocurrencies, for example, would no longer be possible. Under part of the regulatory framework, the president will consider whether, among other things, he will ask Congress to change the Bank Secrecy Act and the laws against unlicensed money transfers so that they explicitly apply. non-fungible token (NFT) exchanges.

In terms of what happens next, it says an illicit financial risk assessment of decentralized finance will be completed by the end of February 2023 and an assessment of NFTs by July 2023.

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Sami AYADI Avatar
Sami AYADIE

Against the angelic spirit of the intercessors of the current monetary system, I am against DeFi, digital assets and the metaverse. Lawyer in Luxembourg, I am interested in cryptocurrency investment funds.

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