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First Ever Crypto Framework Released By The White House

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Cryptocurrency has a complex history with regulators that is likely to continue for some time. The last couple of years have seen a number of government agencies take an interest in cryptocurrency regulation, though these efforts haven’t always been coordinated or concluded as such. The recent move from the White House indicates it wants to streamline these various initiatives after a six-months long study done by various government agencies. A framework to regulate crypto has been released by Biden Government in response to the signed Executive Order (EO) in march.

This framework provides a blueprint for the future of U.S. policy on this issue and will serve as a basis for federal agencies to develop further action plans. It will ensure Americans are protected from illicit activity and fraud within the space and provide a level playing field for innovation to happen.

In this blog, we are going to summarize the 6 key elements around which the framework and policies have been established. Let's start!

Consumer Protection

The framework aims to protect consumers, investors, and businesses from fraud and abuse; malicious actors; and illicit financial activity.

For instance, the framework includes a commitment by all parties of the crypto Ecosystem:

  • To protect consumers from abusive practices as they engage with digital assets. Regulators like the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) have been encouraged to enforce the law and order for the same.
  • To help consumers make informed decisions about transacting with digital assets. The Financial Literacy Education Commission (FLEC) will lead public-awareness efforts in that regard
  • To build trust in the safety and soundness of using digital assets for investment or transactional purposes (by establishing standards for security measures).

Safe & Affordable Financial Access

Bridging traditional finance with DeFi, the framework is designed to promote access to safe & affordable financial services for all. Instant payment system (including cross-border payments) access will be given to encourage innovative use & adoption.

National Science Foundation (NSF) will be responsible for further research to find out the technical, social, and economic impact of crypto & other digital assets. In particular, the framework proposes that the financial inclusion of digital assets and diversity should be priorities for policymakers as they develop new regulations.

Financial Stability

US Treasury will monitor the financial system data for emerging risks, including cybersecurity threats and vulnerabilities in critical infrastructure systems. It will also take regulatory actions to mitigate them before they become systemic issues or serious threats to financial stability.

International organizations like the Organization for Economic Co-operation and Development (OECD) and the Financial Stability Board (FSB) will collaborate with the treasury to further boost the efforts. Financial Stability Oversight Council (FSOC) will publish a report in October to list out financial-stability risks, regulatory gaps & other recommendations to strengthen the crypto economy within the country.

Responsible Innovation

Digital Assets Research and Development Agenda will be created by the Office of Science and Technology Policy (OSTP) and NSF for research and development purposes towards the underlying technology behind cryptocurrency. Department of Energy will focus on mitigating environmental risks. Extensive research will be done by including all federal agencies and top industry stakeholders to achieve stability and promote innovation.

Financial Leadership

The United States has the largest economy and most advanced financial system in the world. In addition, U.S. banks have played a pioneering role in developing new types of digital assets that can improve financial inclusion, increase efficiency, and expand access to capital markets for American consumers and businesses. This framework aims to ensure that the US remains at the forefront of global innovation while also promoting safe and responsible innovation in our markets. To achieve this, US will collaborate with international governing bodies like G7, G20, OECD, FSB, FATF & other countries to share knowledge and resources.

Fighting Illicit Finance

The United States is committed to addressing illicit finance through all available means. US Department of Justice (DOJ) will amend existing laws to prosecute financial crimes related to anti-money laundering and countering the financing of terrorism (AML/CFT) within crypto space. The Treasury will present an illicit finance risk assessment report on DeFi by Feb 2023 & on NFTs by July 2023. Federal agencies will collaborate with the private sector to provide awareness related to illicit financial activities and how to avoid/address them.

In addition to these 6 key points, USA is also exploring a U.S. Central Bank Digital Currency (CBDC), a digital form of the USD. You can check out the full report here to make your own conclusions. I don't know how the worldwide crypto community is going to react to this regulation. I guess we will find out soon enough! What do you guys think? Comment below!

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