On Mar. 9, President Biden handed down an executive order on digital assets, directing regulatory agencies to warm up their research engines to figure out this whole crypto thing.
The long-winded document, boring to everyone but government or crypto nerds, outlines deadlines for the many arms of the executive branch: If the government does not delay, 2022 is the year that Washington gets serious about crypto.
“In November 2021, non-state issued digital assets reached a combined market capitalization of $3 trillion, up from approximately $14 billion in early November 2016. Monetary authorities globally are also exploring, and in some cases introducing, central bank digital currencies (CBDCs).”
This year has already proved to be a year of calamity. In this stressful time, it is up in the air if the many branches of bureaucrats will support the crypto industry or stifle it, either let the genie out of the lamp or throw the thing into the Arabian sea.
Here is an itemized roadmap, a timeline of what the industry can expect in terms of research, regulation, and reports based on the order.
Crypto compliance and regulatory agencies use this as a cheat sheet for the order’s wording, split up into due dates throughout the year and into 2023.Biden EO Tineline Infographic by LendIt Fintech
Executive Order long-winded review
Abbreviations: Attorney General (AG) Secretary of State (SoC); Secretary of Treasury, Treasury (Tres); Homeland Security, (HS); Federal Reserve (Fed) Secretary of Commerce (SoC;) the Director of the Office of Management and Budget, (OMB;) the Director of National Intelligence, (NI;) the Administrator of the United States Agency for International Development, (AID) Congress of the National Strategy for Combating Terrorist and Other Illicit Financing (NSCTIF)
Before 90 days: How are criminals using crypto?
Congress updates a guidebook to fighting terrorism and illicit financing every year, called the NSCTIF. This year it was submitted on Jan. 12, 2022. The order said that exec and reg agencies like the Tres SoS AG, etc., need to report how criminals currently use digital assets, the risks, and trends. If “submission” means preposed to the house, they have until April 12.
90 days: Criminals who use digital assets beware
Within 90 days, the order said the AG, with the help of SoS, Tres, and Homeland Security, has to submit a report to the president on how they can strengthen law enforcement options for detecting, investigating, and prosecuting illegal activity related to digital assets crypto. It should be by June 7, 2022.
120 days: Turn reports into Regs, crackdown
The order said 120 days after the NSCTIF was submitted (again, Jan. 12?), the Tres AG SoC HS, OMB, NI, etc., need to have a game plan ready based on the last report: a coordinated action plan. The order said financial service providers (looking at your crypto exchanges) need increased compliance with AML/CFT. You have till May 7, or later. Most centralized exchanges already do these anyway.
July (at the earliest)
The order said that 120 days after many risk and terrorist financing reports (most of them completed in February), the Tres has to talk to relevant agencies and start building regulations to deal with the risks in digital assets. Then, whatever the reports find criminals are doing, they will write new powers to stop by July at the earliest.
One hundred twenty days following completion of all of the following reports — the National Money Laundering Risk Assessment; March 1 the National Terrorist Financing Risk Assessment; (February) the National Proliferation Financing Risk Assessment; Feb. 20 and the updated National Strategy for Combating Terrorist and Other Illicit Financing.
Design framework to support development by July 7
The order said 120 days after the date of this order, the Tres, with help from the SoS, SoC, AID, etc. have to build a legal and policy framework to work with the international community to:
- enhance adoption of digital assets
- promote dev of digital assets and CBDC tech
The order said the framework has to be cooperative and best practices, with the US as a leader, following the Tres and reg mindset.
’22 Crypto fall: September and 180 days later
The order said a lot has to happen by September ’22. First, with help from other agencies, the Tres has to prepare a report on the future of money and payment systems, focusing on the adoption of digital assets and how tech will affect the US financial system. Specific points to research are CBDC design options, how a US CBDC would work and affect private sector crypto, how it would affect inclusion.
- CBDC design options, how a US CBDC would work
- how a CBDC would affect private-sector digital assets
- how CBDCs affect inclusion
- future of sovereign and private money, how it affects democracy
- if foreign CBDC could replace existing currencies and the US dollar
- security risks, human rights risks
The order said the AG, with the help of the Tres and Fed has until September to figure out what laws need to change if the US decides to implement a CBDC. In the same timeframe, the Fed Reserve has to figure out how CBDCs could improve payments, develop a plan to launch a CBDC, and how it would affect monetary policy.
Protecting consumers and business
By September, the Tres and other regulators like the FTC, SEC, etc., shall submit a report on the effects of digital asset adoption on US consumers and businesses. For example, one section can look at mass adoption, how tech impacts vulnerable populations, with policy recs to protect consumers, businesses, and investors.
The CFPB, FTC, etc., have until September to consider the effects of digital assets on competition and if new consumer protections need to come into play. The SEC and FDIC, CFTC have to decide if the new crypto markets require new investor protections, etc.
The Director of Science and Tech and the CTO of the US have until September to evaluate what infrastructure the executive branch needs to implement a CBDC. They need to define the risks, offer ideas on good designs, how quantum computing could help or hurt such a system, etc.
Also, the SoC and SoS Tres have until September to figure out a framework to support the US economy as a world leader in developing digital asset tech.
Crypto proof of work
The CTO, EPA, and related agencies have until September to research how distributed ledger tech affects the economy and energy how bitcoin mining affects climate change in the short and long term. This report will study how crypto energy use hurts the environment and mitigate proof-of-work energy use.
But, the government will also reach how blockchain tech could help monitor climate change or how cryptocurrencies could be used to track emissions and reward going green.
Cyber criminals, lookout
The AG, CFPB has until September to think up how law enforcement should investigate digital asset criminals. If law enforcement needs more tools to stop crypto criminals, the fed will voice that here.
October, the month of the digital dollar, systemic risk
The order said the AG Tres and Fed has 210 days to write a bill that introduces a US digital dollar if all the other reports say it is a good idea.
Also, in 210 days, the Tres and FSOC should look into the financial stability risks and gaps in regs that govern digital assets today. Then, by October this year, the Fed will decide if it needs to write new laws to govern the crypto market.
March ’23; one year away
Finally, the last order said a year from the EO, the Tres Office of Science and Tech, EPA, etc., needed to update the crypto environmental report they wrote and handed to the president in September.