red 
In March 2022, the Oval Office released its Executive Order (EO) on “Ensuring the Responsible Development of Digital Assets.” It charged the heads of several government agencies with developing a set of policy recommendations related to six basic policy principles.
These are: consumer and investor protection; promoting financial stability; fight against illegal financing; US leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation.
Since the EO was released six months ago, nine reports have been submitted to the president with policy recommendations for a resilient and prosperous digital asset economy in the US. The White House has since released a fact sheet outlining the recommendations.
Here’s everything you need to know from the fact sheet and how it may affect the US crypto economy moving forward.
Protection of consumers, investors and companies
The fact sheet recommends that the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) continue to conduct “aggressive” investigations and enforcement actions related to illegal activities related to digital assets. The Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC) are also encouraged to continue monitoring consumer complaints.
Aggressive action against bad actors and cybercriminals is a core mandate of these regulatory agencies. Vigorous enforcement and investigation is already a strategy in place – particularly by the SEC, which has significantly increased its internal staff dedicated to cryptocurrency enforcement in recent months. Given that agencies are already implementing this strategy, this reads more like an endorsement than a recommendation.
Despite public attitudes favoring a proactive approach to combating crime – through greater regulatory clarity, for example – the current topic of strong enforcement appears to favor a more retroactive approach that punishes rather than deters activity.
While the fact sheet calls for better guidance from the agencies on the risks associated with digital assets, many areas – particularly in the application of securities and commodities laws to crypto-assets – need clarification first. For example, which cryptoassets are securities and which legal or regulatory frameworks determine this classification?
Promoting access to safe, affordable financial services
The current barrier to entry to safe and affordable financial services is too high, leaving seven million Americans unbanked. The data calls for a faster payment rail and improved efficiency for cross-border remittances. While the fact sheet cites FedNow—a long-standing government effort for instant payments by financial institutions—as a possible solution, blockchain technology is already widely used in the private sector to provide these benefits.
The successful delivery of crypto funding to the Ukrainian military was a recent and powerful demonstration of the real value of blockchain in improving the security and efficiency of cross-border funds. In March, research by Elliptic revealed that more than $60 million in crypto funds were donated to Ukraine within just weeks of the Russian invasion.
Encouraging financial stability
Stablecoins, in particular, have been cited as a possible threat to financial stability if not paired with proper regulation – a reference to the fallout caused by Terra’s algorithmic stablecoin UST, which collapsed earlier this year. One of the key solutions offered by the table is to strengthen the ability of financial institutions to identify and mitigate cyber vulnerabilities.
The value of a blockchain analytics provider like Elliptic is just that – enabling users to proactively identify the risk associated with individual crypto wallets and other virtual asset service providers. In its virtual currency guidance, the New York Department of Financial Services (NYDFS) advocated “the importance of blockchain analytics to effective policies, processes and procedures, including, for example, those related to customer due diligence, transaction monitoring and sanctions screening “.
Understanding whether someone has a connection to a dark web or political extremist group is a fundamental principle of risk mitigation. In the same way that ships rely on beacons to prevent disaster, a healthy cryptoeconomy depends on the intelligence provided by blockchain analytics to spot a threat before it arrives.
Strengthening America’s global financial leadership and competitiveness
The report calls on the United States to continue its leadership role in international forums with our global allies to share knowledge and bring American values to these conversations. As an active member of the G7, the Financial Action Task Force (FATF) and other similar gatherings, this is an area where the US has already shown great strength.
The Commerce Department was called upon to “help America’s top financial technology and digital asset companies find a foothold in global markets for their products.” The problem is not the inadequacy of our companies on the global stage.
The real threat to US competitiveness and our global leadership is the ongoing trend of American companies moving to other jurisdictions with more favorable regulatory frameworks. Put simply, regulatory ambiguity is bad for business.
The fight against illegal finance
Fighting illicit financing is at the core of Elliptic’s mission to make the cryptoeconomy a safe place to transact and invest. The US has been the pre-eminent leader in its AML/CFT framework.
While we are leading the way in some areas, the fact sheet calls for possible changes to our current regulatory framework, including the Bank Secrecy Act (BSA) and anti-unlicensed money transfer laws for digital asset exchanges and non-fungible token (NFT) platforms.
Any U.S.-compliant digital asset exchange is already regulated as a money transmitter and meets its regulatory obligations accordingly.
However, the inclusion of non-fungible token (NFT) platforms in the money services business (MSB) classification would represent a significant change to their current regulatory obligations. This change may require significant business adjustments to NFT platforms to remain compliant under the new MSB designation.
The Treasury will complete its risk assessment of the illicit financing of decentralized finance (DeFi) and NFTs by early to mid-2023. The Treasury’s findings will undoubtedly play a significant role in determining whether there will be any changes to the regulatory obligations of NFTs and DeFi platforms. If NFT platforms are regulated as MSBs, they will be liable for the same BSA obligations as many other counterparties providing digital asset services.
Conclusion
The true impact of these recommendations remains to be seen. Still, the fact sheet offers a forecast of what the future may bring.
Recommendations for agencies to engage with the private sector are critical and should not be ignored as regulatory and policy strategies continue to evolve. Interagency and intergovernmental data sharing is another valuable tool for successful risk mitigation highlighted in the report.
There is also a recurring theme of stronger and more “aggressive” enforcement action covering many policy principles and recommendations. While bad actors should always be held accountable, the use of intelligence tools like blockchain analytics combined with greater regulatory clarity will better preserve American innovation and competitiveness than an environment of regulatory uncertainty or arbitrage.
Regulation Financial Services Americas
