- The U.S. Treasury Department has published three reports on digital assets following President Biden’s executive order on “Ensuring Responsible Development of Digital Assets.”
- Treasury Secretary Janet Yellen shared a statement accompanying the reports, saying that there could be “significant opportunities” and risks to digital assets.
- The reports covered the future of money and payments, the potential impact digital asset growth could have on customers and companies, and ways to prevent crypto-related crime.
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Treasury Secretary Janet Yellen said that while there are risks to digital assets, there could be “significant opportunities.”
Treasury Shares Crypto Reports
Six months after President Biden signed an executive order on “Ensuring Responsible Development of Digital Assets,” the Treasury has shared three reports on how policymakers could regulate the space.
The White House’s finance department published detailed round-ups on three crypto-related topics, covering the future of money and payments, the impact on consumers and companies, and plans for preventing financial crime. The topics discussed largely mirrored those featured in the White House’s crypto regulatory framework, which was also published today.
In a statement sharing the three reports, Treasury Secretary Janet Yellen acknowledged the potential digital assets could have, while also acknowledging the risks. “The reports clearly identify the real challenges and risks of digital assets used for financial services,” she said. “At the same time, if these risks are mitigated, digital assets and other emerging technologies could offer significant opportunities.”
Government Tips NFT Use Cases
The guide to the future of money and payments discussed potential designs for a Central Bank Digital Currency, noting that a digital dollar could offer benefits like faster transactions and finality and the ability to process cross-border payments. It also urged the Federal Reserve to continue its research into CBDCs. Additionally, the report focused on the need for the U.S. to support “responsible innovations in payments,” hinting that a new framework may be needed to support non-bank companies.
In the report covering the potential implications digital assets could have for consumers and businesses, the Treasury pointed to potential risks. The risks were broken down into three categories: conduct risks (such as fraud), operational risks (such as software bugs), and intermediation risks (such as a crypto custodian going insolvent). It also acknowledged some of the potential use cases for NFTs, including tokenizing real estate deeds, paying music and film royalties on the blockchain, and certifying the authenticity of goods. It also said that NFTs can represent membership tokens or tickets, but that “many of the potential use cases are still materializing, in part due to evolving technological and legal landscape, including with respect to licensing, contracts, copyright and intellectual property, anti-money laundering, and data protection.”
The third report touched on addressing crime in the digital assets space. It highlighted potential threats such as money laundering, disintermediation, and terrorist financing, adding a list of priority actions for the government to focus on. Those actions include plans to further monitor emerging risks, improve anti-money laundering regulation enforcement, and punish cybercriminals with actions like seizures, criminal prosecutions, civil enforcement, and targeted sanctions. It added that “mixing services, darknet markets, and non‑compliant VASPs used to launder or cash out illicit funds into fiat currency are of primary concern.” To the ire of the cryptocurrency community, the Treasury took the controversial decision to ban the privacy protocol Tornado Cash and its smart contracts last month; Coinbase is funding a lawsuit against the government department over the sanctions.
While the Treasury has commented on crypto in the past and more recently stepped in to ban Tornado Cash, today’s reports offer a comprehensive insight into how the department is planning to monitor the space. Yellen’s comments show that while the Treasury is approaching crypto with caution due to the risks, it’s not ready to dismiss the technology altogether.
Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.