US government agencies must redouble enforcement of the digital asset sector and identify gaps in cryptocurrency regulation, the Biden administration said on Friday, citing their potential for misuse and harm despite 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 has stopped short of backing a digital dollar.
The government’s collective action, announced in a series of published reports, follows an executive order signed by President Joe Biden 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’ve learned the hard way from history, innovation without proper regulation can disrupt and cause significant damage to financial systems and people,” Treasury Secretary Janet Yellen told reporters. .
The reports called for regulators such as the Securities and Exchange Commission and the Commodity Futures Trading Commission to issue guidance and regulations on the risks of the digital asset ecosystem, including the potential for cryptocurrencies to be used for money laundering or fraud.
The White House also said Biden will consider asking Congress to amend the Bank Secrecy Act to apply to digital asset service providers, including cryptocurrency exchanges and platforms that hold non-fungible tokens, or NFTs. The BSA requires lenders to report suspicious transactions to the Treasury.
Biden will also consider the agencies’ recommendations to create a federal framework to oversee non-bank payment providers.
The Justice Department also said it was creating a digital assets coordinator, overseeing 150 federal prosecutors, to investigate and prosecute digital asset crimes “to address the growing threat posed by the illegal use of digital assets.”
Cryptocurrencies topped $3 trillion in value last year, but the sector has stumbled in recent months as investors pulled out of risky assets amid rising interest rates.
Commerce Secretary Gina Raimondo outlined the risks, adding that well-regulated digital assets could make international payment systems more competitive and help underserved populations.
Brian Deese, director of the National Economic Council, said cryptocurrencies could harm financial stability and national security without proper oversight.
“Cryptocurrency regulation is necessary if digital assets are to play the role we believe they can play in fostering innovation and supporting our economic and technological competitiveness,” he said.