CNN
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US government agencies must double down on enforcement of the digital asset sector and identify gaps in cryptocurrency regulation, the Biden administration said on Friday, citing their potential for abuse and harm, even as they noted their growing role in global finance.
The Treasury Department will also lead a group of government agencies that will consider a central bank digital currency, although the White House stopped short of backing a digital dollar.
The collective government action, announced in a series of published reports, follows an order President Joe Biden signed earlier this year to “Ensure Responsible Development of Digital Assets.”
“Innovation is one of the hallmarks of a vibrant financial system and economy, but as we have painfully learned from history, innovation without adequate regulation can result in significant disruption and harm to the financial system and individuals,” Treasury Secretary Janet Yellen told reporters.
The reports urged regulators such as the Securities and Exchange Commission and the Commodity Futures Trading Commission to issue guidance and rules on ecosystem risks for digital assets, including the potential for cryptocurrencies to be used for money laundering or fraud.
The White House also said Biden would consider asking Congress to amend the Bank Secrecy Act to apply to digital asset service providers, including cryptocurrency exchanges and platforms for non-fungible tokens, or NFTs. The BSA requires lenders to report suspicious transactions to the Treasury.
Biden will also consider recommendations from agencies to create a federal framework to oversee non-bank payment providers.
The Justice Department also said it created a Digital Asset Coordinator that oversees 150 federal prosecutors to investigate and prosecute digital asset crimes as part of its efforts “to combat the growing threat posed by the illicit use of digital assets.”
Cryptocurrencies soared past $3 trillion in value last year, but the sector has stumbled in recent months as investors have pulled out of risky assets amid rising interest rates.
Commerce Secretary Gina Raimondo noted the risks, adding that well-regulated digital assets could make international payment systems more competitive and help underserved populations.
Brian Deese, the director of the National Economic Council, said that cryptocurrencies could harm financial stability and national security without proper oversight.
“Regulation of cryptocurrencies is necessary if digital assets are to play the role we believe they can in fostering innovation and supporting our economic and technological competitiveness,” he said.
