President Biden has signed an Executive Order intended to respond to the explosive growth in digital assets, including cryptocurrencies. Titled “Executive Order on Ensuring Responsible Development of Digital Assets,” the Order is described by the White House as “outlining the first ever, whole-of-government approach to addressing the risks and harnessing the potential benefits of digital assets and their underlying technology.”
The Order sets out the following national objectives with respect to digital assets: consumer and investor protection; protection of financial stability and mitigation of systemic risk; mitigation of illicit finance and national security risks; reinforcement of U.S. leadership in the global financial system and in technological and economic competitiveness; promotion of equitable access to safe and affordable financial services; and promotion of responsible development and use of digital assets. The actions contemplated by the Order include an assessment of the possible benefits and risks of launching a U.S. central bank digital currency (CBDC).
The Order calls for its implementation through the use of an interagency process in which certain specified agencies would participate and in which representatives of other agencies “may be invited to attend interagency meetings as appropriate.” Such other agencies include the CFPB, FTC, Federal Reserve Board, FDIC, and OCC. The provisions of the Order that specifically contemplate roles for these agencies include provisions that:
- Encourage the FTC Chair and CFPB Director to consider what, if any, effects the growth of digital assets could have on competition policy;
- Encourage the FTC Chair and CFPB Director to consider the extent to which privacy or consumer protection measures within their respective jurisdictions may be used to protect users of digital assets and whether additional measures may be needed;
- Encourage the Fed Chair, the FDIC Chair, and the Comptroller of the Currency to consider the extent to which investor and market protection measures within their respective jurisdictions may be used to address the risks of digital assets and whether additional measures may be needed; and
- Direct the Treasury Secretary to convene the Financial Stability Oversight Council (whose members include the CFPB Director, FDIC Chair, Fed Chair and Comptroller of the Currency) and produce a report outlining the specific financial stability risks and regulatory gaps posed by various types of digital assets and providing recommendations to address such risks, including any proposals for additional or adjusted regulation and supervision as well as for new legislation.
CFPB Director Chopra issued a statement on the Executive Order in which he indicated that the CFPB “is committed to working to promote competition and innovation, while also reducing the risks that digital assets could pose to our safety and security” and that the CFPB “must make sure Americans in all financial markets are protected against errors, theft, or fraud.”
In a related development, the Treasury Department announced that the Financial Literacy and Education Commission (FLEC) “would form a new subgroup on digital asset financial education, which will operate alongside the FLEC’s current workstream analyzing the impact of climate change on household and community financial resilience. Through this group, the FLEC will work to develop consumer-friendly, trustworthy and consistent educational materials, tools and outreach to help consumers make informed choices about digital assets.” (The FLEC was established by the Fair and Accurate Credit Transactions Act of 2003 and tasked with the development of a national strategy on financial education. It is chaired by the Secretary of the Treasury and the CFPB Director serves as Vice-Chair.)