Biden administration calls for more digital asset regulation

Federal regulators should “aggressively” pursue enforcement against illegal practices in digital asset markets and redouble efforts to monitor consumer complaints about bad actors, according to a series of interagency reports released today by the Treasury Department. The nine reports, spurred by a March 9 executive order by President Joe Biden, call on federal agencies to take multiple steps to increase regulation and educate the public about the risks associated with cryptocurrencies and other digital assets. They also call for further research into the creation of a U.S. central bank digital currency, or CBDC.

In a statement, the Treasury Department said the reports “articulate a clear framework for responsible digital asset development and pave the way for further action at home and abroad.” The Biden administration plans to take several actions in response. They include directing regulators the Securities and Exchange Commission and Commodity Futures Trading Commission to “aggressively pursue” investigations and enforcement against unlawful practices in the digital assets space; urging the CFPB and Federal Trade Commission to monitor consumer complaints; and directing the Financial Literacy Education Commission to lead a public-awareness effort to help consumers understand the risks involved with digital assets.

Other actions will require approval from Congress. The Biden administration will evaluate whether to ask Congress to amend the Bank Secrecy Act, anti-tip-off statutes and laws against unlicensed money transmitting to apply explicitly to digital asset service providers, according to the Treasury Department. The president will also explore whether to urge Congress to raise the penalties for unlicensed money transmitting to match the penalties for similar crimes, and to amend relevant federal statutes to let the Justice Department prosecute digital asset crimes in any jurisdiction.

In terms of creating a CBDC, the reports outline no clear course of action, although they do point to “significant benefits” such as helping “preserve U.S. global financial leadership.” The Biden administration is instead urging the Federal Reserve to continue its ongoing CBDC research but added that the Treasury Department will lead an interagency working group to consider the potential implications of a CBDC, leverage cross-government technical expertise and share information with partners.

American Bankers Association President and CEO Rob Nichols noted in a statement that U.S. banks are leading the way in financial innovation and offering cutting-edge solutions. “As policymakers move to bring unregulated crypto-native firms and offerings into the regulatory perimeter, we believe consumers and our financial system are best protected when we follow the principle of ‘same activity, same regulation,’” he said.

Nichols also reiterated ABA’s concern about creating a CBDC, which “would fundamentally reshape the banking industry to the detriment of consumers and the economy, and we continue to urge banking regulators and Congress to consider the negative, unintended consequences that could result from going down that misguided path.”