In November 2021, non‑state issued digital assets reached a combined market capitalization of $3 trillion, up from approximately $14 billion in early November 2016.  Several global monetary authorities are exploring, and in some cases introducing, central bank digital currencies (CBDCs).  On March 9, 2022, President Biden issued an executive order to mandate multiple reports and studies by various agencies around digital asset policy and regulation.

Goals of Executive Order

The goals of the order emphasize:

• Protecting U.S. consumers, investors and businesses
• Protecting US and global financial stability and mitigating system risk
• Mitigating illicit finance and national security risks posed by misuse of digital assets
• Reinforcing US leadership in the global financial system and in technological and economic competitiveness
• Promoting access to safe and affordable financial services; and
• Supporting technological advances that promote responsible development and use of digital assets.

Agencies Involved

A number of government agencies are given roles and responsibilities for these efforts, including 13 Cabinet departments (including Treasury, DOJ, State, and Homeland Security), all major financial services regulators, several science and technology offices, economic and policy officials, intelligence agencies, and even agencies such as the Department of Energy (DOE) and the Environmental Protection Agency (EPA).

In addition the breadth of content of such reports vary widely, from considering privacy/consumer protection, to reporting on energy and climate change to creating a framework for international engagement. Each of the over 20 agencies tasked with reports under this order has a role and assignment.

Key Directives of Executive Order

The executive order:

• Establishes a comprehensive federal framework to ensure the U.S. continues to play a leading role in the innovation and governance of digital assets domestically and abroad.
• Directs relevant departments and agencies to initiate research into the merits of a U.S. Central Bank Digital Currency (USBDC). This includes agency participation in international efforts and projects; a strategic Federal Reserve plan for potential implementation; and a proposal for dollar CBDC legislation to be developed by the Attorney General in consultation with Treasury and the Federal Reserve.
• Calls for the development of a plan to mitigate the illicit finance and national security risks posed by the misuse of digital assets. This adds to previous work to align departments and agencies to combat misuse of digital assets enabling the rise and spread of ransomware.

What Is a “Digital Asset”?

The term “digital asset” is defined in the executive order to refer to: “all CBDCs, regardless of the technology used, and to other representations of value, financial assets and instruments, or claims that are used to make payments or investments, or to transmit or exchange funds or the equivalent thereof, that are issued or represented in digital form through the use of distributed ledger technology.  For example, digital assets include cryptocurrencies, stablecoins, and CBDCs.  Regardless of the label used, a digital asset may be, among other things, a security, a commodity, a derivative, or other financial product.  Digital assets may be exchanged across digital asset trading platforms, including centralized and decentralized finance platforms, or through peer-to-peer technologies.”

While this definition appears to be focused on financial services applications, it is unclear whether such a broad definition intends to cover other aspects of the cryptoverse, such as non-fungible tokens (NFTs) for example.

Timing and Deadlines

The executive order requires an array of reports from various agencies with differing deadlines, ranging from 90 days (e.g., report on intentional law enforcement) to 210 days (e.g., CBDC legislative proposal, financial stability report) including deadlines in between. Other reports have deadlines that are determined based on the submission of other reports.

To view the executive order, click here.