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The US Treasury has proposed a new interagency framework for engagement and cooperation with foreign counterparts and international fora on digital assets regulation.
In a fact sheet published on July 7, the Treasury said the framework is intended to reinforce US leadership in the global financial system and in technological and economic competitiveness.
Among its goals, the framework aims to ensure that the US' “core democratic values” are respected with regard to the development of digital asset regulation, and that consumers, investors and businesses are protected from risk.
“International cooperation among public authorities, the private sector and other stakeholders is critical to maintaining high regulatory standards and a level playing field,” said the Treasury.
“Uneven regulation, supervision and compliance across jurisdictions creates opportunities for arbitrage and raises risks to financial stability and the protection of consumers, investors, businesses and markets.”
Through the new framework, the US intends to seek international cooperation on access to safe and affordable financial services using digital assets, and methods to reduce the costs of both domestic and cross-border public payment systems.
The framework also aims to promote interoperability between platforms and infrastructure within the global financial system, while ensuring the safety and soundness of the international monetary system.
Another stated principle behind its proposed framework is to reinforce US leadership in the global financial system.
Helping other countries to help the US
The interagency framework is led by the Treasury and supported by the Secretary of State, the Secretary of Commerce, the head of the US Agency for International Development (USAID) and the heads of other relevant agencies
Through effective coordination with foreign partners, the US intends to leverage the new framework to bring about digital asset regulation globally in its own image.
As the Treasury puts it: “Inadequate anti-money laundering and combating the financing of terrorism (AML/CFT) regulation, supervision and enforcement by other countries challenges the ability of the United States to investigate illicit digital asset transaction flows.
“These frequently jump overseas, as is often the case in ransomware payments and other cybercrime-related money laundering.”
Outside financial crime, the Treasury also said that inconsistent regulation globally leads to slow and costly cross-border payments and remittance options, particularly among developing countries.
With unified digital assets regulation, both the financial crime risks and cross-border payments challenges associated with digital assets could be addressed on a multilateral basis.
Building on Biden’s digital assets EO
The proposed framework builds on President Biden’s Executive Order (EO) on Ensuring Responsible Development of Digital Assets.
This EO, which was issued in March this year, was the first of its kind to propose a federal digital assets strategy for the US.
In the EO, President Biden outlined an interagency approach to address the risks and harness the potential benefits of digital assets and their underlying technology.
This included proposals on international engagement to adapt, update and enhance adoption of common standards globally for how digital assets are used, transacted and regulated.
The EO also directed the administration to promote the development of digital asset and central bank digital currency (CBDC) technologies consistent with the values and legal requirements of the US.
In a statement from National Economic Council (NEC) director Brian Deese and National Security Advisor Jake Sullivan, the EO was praised for its dual focus on national security and financial innovation.
“This EO marks an intensification of our efforts to promote responsible innovation in the digital assets space,” said Deese and Sullivan.
“Fundamentally, an American approach to digital assets is one that encourages innovation but mitigates the risks to consumers, investors, and businesses, broader financial stability and the environment.
“We are clear-eyed that ‘financial innovation’ of the past has too often not benefited working families, while exacerbating inequality and increasing systemic financial risk.
“This history underscores the need to build robust consumer and economic protections into digital asset development.”
Deese and Sullivan said the EO was the product of months of work with stakeholders in government, industry, advocacy, academia and among the US’ international allies.
The EO was followed up, in June this year, with a report from the Department of Justice (DOJ) calling for greater intelligence sharing between nations to combat crypto-asset crime.
The two most important criminal activities facilitated by crypto-assets, according to the report, are money laundering and ransomware, followed by fraud, theft, drug trafficking and other crimes.
The DOJ also mentions that North Korean state by name as a major launderer of stolen cryptocurrency.
“The cross-border nature of digital asset technologies accordingly requires collaboration with foreign law enforcement partners to locate and gather electronic records and digital evidence to seize and prevent further distribution of digital assets linked to crime,” the report notes.
