On March 9, President Joe Biden signed an executive order calling for a study of digital currencies.
Advocates of regulating digital assets immediately pounced on the order. They viewed it as a bureaucratic move that would delay what they see as necessary government oversight of the expanding digital financial world.
They were partially right. Even though the order, titled “Ensuring Responsible Development of Digital Assets,” directed agencies across the federal government to produce reports on digital currencies and consider new regulations, not much has happened, at least publicly.
Until now.
The Treasury Department is seeking public comment to help it fulfill the part of Biden’s order that calls for coordination among financial regulators to better understand the risks and opportunities presented by digital assets.
Wide public comment sought: Specifically, Treasury wants input on areas cited in Section 5 of Biden’s order, addressing “the implications of developments and adoption of digital assets and changes in financial market and payment system infrastructures for United States consumers, investors, businesses, and for equitable economic growth.”
“For consumers, digital assets may present potential benefits, such as faster payments, as well as potential risks, including risks related to frauds and scams,” Nellie Liang, Under Secretary of the Treasury for Domestic Finance, said in announcing the request for comment.
Input from “the expertise of the American people and market participants” through this comment period will help Treasury focus on digital assets’ opportunities and hazards, she added.
Comments must be received on or before Aug. 8. The quickest way to present your thoughts on crypto and other digital assets is through the Federal eRulemaking Portal at www.regulations.gov.
Main crypto questions: The formal comment request published in the Federal Register notes, in part, that Treasury is seeking public input on digital assets, including cryptocurrency, stablecoin, and central bank digital currency (CBDC), regardless of the type of technology used.
The request covers six specific inquiries in five general categories. They are —
Adoption to Date and Mass Adoption
1. What explains the level of current adoption of digital assets? Please identify key trends and reasons why digital assets have gained popularity and increased adoption in recent years?
2. What actors that would further facilitate mass adoption?Opportunities for Consumers, Investors, and Businesses
3. What are the main opportunities for consumers, investors, and businesses from digital assets?General Risks in Digital Assets Financial Markets
4. Please identify and describe any risks arising from current market conditions in digital assets and any potential mitigating factors.Risks to Consumers, Investors, and Businesses
5. Please identify and describe potential risks to consumers, investors, and businesses that may arise through engagement with digital assets.Impact on the Most Vulnerable
6. An estimated 7.1 million U.S. households do not have access to a financial institution account or credit card. Can digital assets play a role in increasing their access to safe, affordable, and reliable financial services, and if so, how?
The Federal Register document has details on exactly what Treasury would like detailed in responses to these questions.
Digital oversight, moving albeit slowly: The global legal services firm Mayer Brown notes that Treasury’s request for comment was issued the same week that both Liang and Federal Reserve Vice Chair Lael Brainard gave speeches highlighting the financial stability risks posed by digital assets, and the need for regulation to address these risks.
These speeches and the comments request “signal that the Biden administration has made addressing the systemic risks posed by digital assets a policy priority,” say the Mayer Brown analysts.
There is a Senate bill, S. 4356, the Responsible Financial Innovation Act (RFIA), introduced in June by Sens. Cynthia Lummis (R-Wyoming) and Kirsten Gillibrand (D-New York) to establish a US regulatory regime for digital assets. However, it has not moved in the tax-writing Senate Finance Committee. Given that it’s an election year, action this legislative session is not likely.
But Mayer Brown notes that if Treasury uses the information it collects through the solicited comments to produce a consensus-building report, that could act as impetus for legislative action in the 118th Congress.
So if you have ideas about how crypto should be regulated, or not, now is your chance to get them to Treasury.
You also might find these items of interest:
- Cryptocurrency owners apparently are taking their sweet tax-filing time
- Crypto’s latest trouble: global Ponzi scheme under IRS-CI+ investigation
- House Ways & Means is latest to want answers about crypto in workplace retirement plans
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