March 2022
Overview & Summary
President Biden signed an executive order on Wednesday, March 9 that will direct the federal government to produce a plan to regulate cryptocurrencies. This Executive Order will outline the first approach to addressing the risks and potential benefits of digital assets and their underlying technology. The order lays out a national policy for digital assets across six key priorities: consumer and investor protection; financial stability; illicit finance; U.S. leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation.
Notably, the order directs the Federal Reserve to research and potentially develop its own digital dollar, which would be similar to cryptocurrencies. The order also directs the Treasury Department to develop guidelines for Americans trading and using cryptocurrency to facilitate the mitigation and reduction of fraud or market volatility. The Treasury will conduct further research on the potential role of digital assets and blockchain in future payment systems. In addition, other agencies will examine cryptocurrency's role as a speculative asset and its role in illicit finance.
The current administration has been under pressure to play more of a coordinating role in Washington’s approach regarding this asset class, as industry executives continue to lament what they believe is a lack of clarity on rules; this executive order takes a step in that direction.
Our Take
The cryptocurrency market is now worth more than $3 trillion. Surveys suggest that around 16 percent of adult Americans – approximately 40 million people – have invested in, traded, or used cryptocurrencies.
Whether you are an adviser looking to expand your investment strategy to include digital assets, or you are looking to participate in ICOs or build out a platform for trading cryptocurrency as a broker-dealer, it is wise to consider partnering with an established compliance team who can help you navigate this imminent regulation and provide assistance from initial registration to regulatory examination.
CRC recommends that firms prepare to ensure that appropriate controls and procedures are developed to allow sufficient oversight into this area.
As with any compliance initiative or change to regulation, CRC recommends that all personnel are well trained, and that such training is both highly specific to firm policies and procedures and appropriately documented.
Opportunities for CRC to Assist Your Firm
Please contact Mitch Avnet for more information.
Mitch Avnet at mavnet@compliance-risk.com or (646) 346.2468
