Biden Signs Digital Asset EO; GOP Warns Against Anti-Innovation Policy

President Joe Biden signed an executive order Wednesday outlining a national policy on digital assets and directing agencies to explore a U.S. central bank digital currency. Democrats welcomed the news, highlighting crypto-related financial inclusion issues and risks associated with the technology like money laundering. Republicans took a pro-innovation stance, urging Congress to pass legislation to avoid anti-innovation policies.

The White House said the strategy will address risks and harness the “potential benefits of digital assets.” The order outlines a national policy in six areas: consumer and investor protection; financial stability; illicit finance; U.S. leadership in the global financial system; financial inclusion; and responsible innovation. Digital assets topped a $3 trillion market cap in November and are up from $14 billion since 2017, the White House said.

The EO is an “intensification” of efforts to “promote responsible innovation,” said National Economic Council Director Brian Deese and National Security Adviser Jake Sullivan in a joint statement. It will “reinforce U.S. leadership” and “safeguard the long-term efficacy of critical national security tools like sanctions and anti-money laundering frameworks.” The order is the “product of months of work” with stakeholders in government, industry, academia and international organizations, the administration said.

This multitrillion-dollar global industry has “profound implications” for national and state regulators, said Commerce Secretary Gina Raimondo. The technology has “significant potential” for “individual economic empowerment, financial inclusion, and reinforcement of America’s position as a world leader in innovative financial services,” she said. Raimondo cited challenges, saying Commerce is committed to anti-money laundering efforts and counterterrorism. She welcomed Biden’s direction for engagement “with industry, civil society, and other interagency partners in developing a framework.”

It’s important for the U.S. to focus on protecting Americans from the risks of crypto technology by strengthening financial resilience and national security, said Senate Banking Committee Chairman Sherrod Brown, D-Ohio. Authorities should ensure crypto isn’t used to “skirt the law,” he said. He welcomed consideration of a central bank digital currency.

Senate Intelligence Committee Chairman Mark Warner, D-Va., welcomed Biden’s recognition that the centrality of the U.S. dollar will be fundamental to digital asset efforts globally. Warner looks forward to a strategy for a U.S. central bank digital currency and efforts to further establish international norms and standards. “We must ensure that all participants in the digital assets marketplace are actively complying with sanctions, and we need to develop clearer guardrails and improved enforcement to address fraud, illicit finance, and insecurity in the wider digital assets industry,” he said.

The EO makes clear Congress needs to legislate through a transparent process with market participants to avoid anti-innovation policies, said House Financial Services Committee ranking member Patrick McHenry, R-N.C. He noted the committee is examining digital asset issues, saying Congress should acknowledge the benefits, which are “largely” missing in the White House announcements. Despite Democratic arguments, there hasn’t been “widespread evasion of our sanctions using digital assets by Russia, due to the transparent nature of blockchain technology,” he said. “Any attempt to use the crisis in Ukraine as the rationale for today’s action is short-sighted and will not lead us to the right solutions that allow this technology to flourish in the U.S.” The use of cryptocurrency isn’t a “viable workaround” to financial sanctions imposed against Russia and its central bank, a White House official said during a background call with reporters. Offices for House Financial Services Committee Chair Maxine Waters, D-Calif., and Senate Banking Committee ranking member Pat Toomey, R-Pa., didn’t comment.

An official highlighted Biden’s direction to initiate research into a U.S. central bank digital currency, during the conference call. More than 100 countries are exploring or piloting central bank digital currencies for cross-border and domestic use, the official said. Officials also highlighted a “clear problem with lack of access to basic banking services,” saying there’s opportunity to address financial access problems facing lower- and middle-income Americans.

Blockchain groups are ready to aid the administration in studying “pragmatic and timely oversight” of the industry, said the Blockchain Association. The group wants a “clear, unambiguous, and pro-innovation approach to federal policy for the growing crypto industry.” The administration can ensure American leadership through an open and productive dialogue with industry, the group said.