On Wednesday, March 9, 2022, President Biden issued a long-awaited Executive Order, Ensuring Responsible Development of Digital Assets, that outlined a whole-of-government approach to regulating digital assets.[1] The Order implements no new policies or regulations but instead sets out the administration’s priorities for digital asset regulation and establishes a process through which the White House will gather reports on the digital asset ecosystem from over 20 executive agencies named in the Order.

The Order acknowledges the exponential growth of the digital asset market over the past five years and recognizes the government’s interest in enabling “responsible financial innovation” while protecting against perceived risks. The administration’s approach to digital asset regulation is aimed at six objectives: protecting consumers, investors and businesses; ensuring financial stability and mitigating systemic risk; combating illicit finance and national security risks; promoting U.S. leadership and economic competitiveness; encouraging equitable access to the financial system; and supporting the development of digital technologies in a safe, responsible manner.

To realize these objectives, the Order gives instructions and suggestions to over 20 executive departments and independent agencies and lays out an interagency process to collect inputs aimed at:

  • Considering a central bank digital currency (CBDC), which the Order says the administration will treat with the “highest urgency.” The Order directs multiple agencies, led by the Treasury Department, to report on the benefits, risks and viability of a U.S. CBDC and encourages the Federal Reserve to continue the steps it has already taken to evaluate the creation of a CBDC. The Order tasks the Department of Justice with considering whether a U.S. CBDC would require new legislation.

  • Protecting consumers, investors and businesses that the administration perceives are vulnerable to digital asset-enabled crime, privacy and data breaches, and inadequate risk disclosures. The Treasury Department will lead an interagency effort to create a report on the conditions that could lead to the mass adoption of digital assets; how digital asset growth could hurt consumers, investors and businesses; and what potential regulatory and legislative action could be taken to avoid these harms. The Department of Justice is ordered to report on how law enforcement agencies can combat digital asset-enabled crime. The Order encourages independent agencies, including the SEC, CFTC, Federal Reserve Board, FDIC and OCC, to consider whether they have existing power to achieve these goals or whether they require new authorities.

  • Promoting financial stability by encouraging the Treasury Secretary to convene the Financial Stability Oversight Council and produce a report on potential risks to financial stability posed by digital assets and suggestions for how to ameliorate them. The Order notes that executive bodies, including the President’s Working Group on Financial Markets, have already begun analyzing and reporting on perceived stability risks from digital assets.[2] 

  • Limiting illicit finance and national security risks posed by digital assets. The Order instructs multiple executive agencies to submit reports to the president on the potential for digital assets to be used in money laundering, terrorist and proliferation financing, fraud and theft schemes, and corruption. The Order calls for the Treasury Department to develop a “coordinated action plan” among the departments to mitigate these risks.

  • Coordinating with foreign regulators to prevent digital asset activity from shifting to jurisdictions with more-relaxed supervision. The Order sets out priorities for continued cooperation among U.S. and foreign regulators and instructs the Treasury Department to lead the development of a framework for international cooperation on digital asset regulation. However, recognizing that overregulation could cause the U.S. to miss out on the benefits of digital assets, the Order directs the Commerce Department to create a framework to boost U.S. “economic competitiveness” in using digital asset technologies.

Since as early as 2013, individual U.S. agencies have considered how digital assets may fit into existing regulatory schemes.[3] The Order acknowledges these past efforts but signals a shift toward the development of a single, governmentwide approach to digital asset regulation. To determine how to best use existing authorities and whether new laws are needed, the Order solicits input from across the entire executive branch and outlines what the White House describes as the “first ever, whole-of-government approach to addressing the risks and harnessing the potential benefits of digital assets.”[4]

The interagency process described in the Order, which will collect input from multiple departments and agencies over the next year, suggests that the administration is gathering information in preparation for a unified regulatory push. However, the regulation and legislation foreshadowed by the Order will likely take time to emerge. The Order’s information collection efforts may be complicated by the number of agencies involved in carrying out the Order’s directives, some of which are independent agencies the president cannot directly command. While it may be some time before the administration’s regulatory approach takes shape, the Order offers hope to industry participants that concrete guidance they can rely on is forthcoming.

[1] Executive Order on Ensuring Responsible Development of Digital Assets (March 9, 2022) (the Order), https://www.whitehouse.gov/briefing-room/presidential-actions/2022/03/09/executive-order-on-ensuring-responsible-development-of-digital-assets/.

[2] President’s Working Group on Financial Markets, Report on Stablecoins (Nov. 2021), https://home.treasury.gov/system/files/136/StableCoinReport_Nov1_508.pdf.

[3] See, e.g., Financial Crimes Enforcement Network, Guidance, Application of FinCEN’s Regulations to Persons Administering, Exchanging, or Using Virtual Currencies (March 18, 2013), https://www.fincen.gov/sites/default/files/shared/FIN-2013-G001.pdf.

[4] Press Release, White House, Fact Sheet, President Biden to Sign Executive Order on Ensuring Responsible Development of Digital Assets (March 9, 2022), https://www.whitehouse.gov/briefing-room/statements-releases/2022/03/09/fact-sheet-president-biden-to-sign-executive-order-on-ensuring-responsible-innovation-in-digital-assets/.