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USA IS ENSURING RESPONSIBLE DEVELOPMENT OF DIGITAL ASSETS

On Wednesday, March 9, U.S. President signed an executive order – a directive through which he manages the federal government’s activities. The decree was dedicated to the problem of digital asset development. The government administration was required to develop a strategy to better understand the risks and opportunities posed by digital assets. With this executive order, the White House directed the Departments of Treasury, Commerce, State and Justice, among others, to examine elements of the rapidly growing cryptocurrency market. The government agencies will review the market over the next six months and prepare a public report with recommendations for the federal government’s approach to digital currencies.

This action has to do with the rapid growth of digital assets – especially cryptocurrencies, which can be observed over the past few years. This is both an increase in market value and popularity among investors. Central banks of many countries, among them the National Bank of Poland (NBP), are researching or piloting central bank digital currency (CBDC), which may indicate the importance of this instrument in the future. The awareness of politicians towards cryptocurrencies has increased significantly. A U.S. digital currency would be issued and backed by the Federal Reserve, much like paper dollar bills and coins, which is not the case with “private” cryptocurrencies.

Cryptocurrency can be defined as a group of digital assets that include the popular Bitcoin and Ethereum, but also a large number of lesser-known coins and stablecoins – digital assets built in a way that allows them to be easily exchanged for dollars.

At the heart of the regulation is the desire to keep the U.S. financial system at the forefront of the world in terms of technology, as well as to create solutions that guarantee the safety of consumers, the entire system and the climate. This requires an innovative approach to this area, allowing for growth. The United States aims to maintain its leading position in the international financial arena. Hence the executive order that will outline the first-ever government-wide approach to addressing the risks and leveraging the potential benefits of digital assets and underlying technologies.

The regulation outlines six main elements that a national digital asset policy should implement. These are:

  1. Protect investors and consumers by developing policy recommendations, potential consequences of market changes, and oversight mechanisms for digital assets.
  2. Protecting the stability of the U.S. financial system and the global system by mitigating potential risks associated with the digital asset market.
  3. Another component of the program is addressing national security threats posed by the illicit use of digital assets. All relevant U.S. government agencies are tasked with neutralizing these threats, as well as working with foreign partners in this area.
  4. promoting U.S. leadership in technology, in addition to strengthening the position of the United States in the global financial system, also by stimulating competitiveness, research and development activities.
  5. ensuring access to safe and affordable financial services will be an important area of the administration’s efforts to ensure that no group is excluded.
  6. Technological development is crucial for the implementation of the set tasks. It is necessary to build an appropriate infrastructure for the operation of digital assets, while reducing the negative impact on the environment is also a priority. The process of generating revenue is done with energy-intensive supercomputers.

The Treasury Department is exploring the possibility of creating a U.S. digital currency, which has also been under review by the Federal Reserve. The Justice Department is reviewing existing standards for the potential need for Congress to pass new legislation addressing the central bank’s digital currency. The president’s executive order requires the Treasury Department to review the potential risks that cryptocurrencies pose to financial stability, as well as risks related to illicit finance and national security. The agency will work with the Securities and Exchange Commission, the Federal Trade Commission, and the Commodity Futures Trading Commission.

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What is pointed out in this context is the great importance of system quality in crisis situations – having in mind Russia’s assault on Ukraine as an example. There were multiple incidents of ransomware that exploited Russia’s emerging cryptocurrencies, as well as other cyber activities. On the positive side, people from all over the world have supported Ukraine by making direct donations through cryptocurrencies. The regulation aims to block threats and promote opportunities from digital assets.

Sources:

  1. 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/
  2. https://www.cnbc.com/2022/03/09/bitcoin-btc-jumps-after-treasury-statement-on-crypto-executive-order.html
  3. https://www.nytimes.com/2022/03/09/us/politics/crypto-regulation-biden.html
  4. https://www.wsj.com/articles/white-house-to-order-broad-review-of-cryptocurrencies-11646707044
  5. https://www.state.gov/ensuring-the-responsible-development-of-digital-assets/
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