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Last week, the US Treasury Department delivered a report to the president called A Framework for International Engagement on Digital Assets. The briefing – written in consultation with other key agency officials from the Department of Commerce, the Department of State and the US Agency for International Development (USAID) – was released in accordance with the directive of the President’s recent Executive Order on Ensuring the Responsible Development of Digital Technologies Assets and its principles-based approach to policy.
As noted in the corresponding press release, the Treasury followed the guidelines of the executive order while tailoring the framework to reflect the international nature of its work. The release states the following goals:
- “Protect consumers, investors and companies in the United States and globally by promoting technology and regulatory standards that reflect American values;
- protect US and global financial stability and mitigate systemic risk;
- mitigate the illicit financial and national security risks posed by the misuse of digital assets and counter and respond to efforts by foreign adversaries to establish standards and promote their own protocols;
- strengthen US leadership in the global financial system and in technological and economic competitiveness, including through the responsible development of payment innovations and digital assets and by advancing technology and regulatory standards that are consistent with US values;
- promote access to safe and affordable financial services; and
- support technological advances that promote responsible development and use of digital assets by advancing research and relationships that enhance collaborative learning.”
The US government has a strong and consistent record of participating in global engagement around technology and innovation, leading these discussions and spearheading much of the international cooperation and coordination.
This experience is especially true when it comes to digital assets and other developments in the rapidly digitizing global economy. According to the press release: “as chair of the Financial Action Task Force (FATF) from 2018 to 2019, the United States led the group in developing and adopting the first international standards on digital assets. During its G7 2020 presidency, the United States established the G7 Digital Payments Expert Group to discuss CBDCs, stablecoins and other digital payments issues.”
In addition to its work with the G7, the United States has also led work with the G20 as well as the FATF on issues such as frictions over cross-border payments and remittances and data governance frameworks. As the Ministry of Finance strongly emphasizes in its publication, there is still much work to be done on the international stage in terms of the technology, digital assets and policies that will govern these innovations.
The report lists the main international groups and organizations with which the US will seek to strengthen or continue its work.
These groups include the G7, G20, Financial Stability Board (FSB), FATF, Egmont Group of Financial Intelligence Units (FIU), Organization for Economic Co-operation and Development (OECD), International Monetary Fund (IMF), World Bank and other multilateral banks and many other standard setting bodies. The US will work with these groups on research, discussions, coordination of policy frameworks, standard setting and fact finding.
The Treasury press release concludes by acknowledging the importance and imperative that “such international work should continue to address the full range of issues and challenges posed by digital assets, including financial stability; consumer and investor protection and business risks; and money laundering, terrorist financing, proliferation financing, sanctions evasion and other illegal activities.
In addition, the United States will promote the adoption and implementation of international standards through bilateral and regional engagements. In all engagements, the United States will seek to ensure a coordinated message, limit duplication, and encourage work to be kept within its primary stakeholders.”
The FSB has published a statement on international crypto regulation
While on the topic of international regulatory coordination on digital assets, this week the Financial Stability Board (FSB) also released a statement titled International Regulation and Supervision of Crypto-Asset Activities. With the ongoing – and seemingly escalating – volatility of the crypto market, regulators and policy makers on the international stage are expressing their concerns about overall market stability and the potential vulnerabilities that digital assets are exposed to.
There are also several concerns raised about other predicted effects of this recent price increase and market volatility, such as reduced market confidence, high investment losses, and turmoil in short-term funding markets.
The FSB’s statement describes a proportionate risk-based approach to regulation and supervision at the domestic and international level for cryptoassets. It also notes the importance of virtual asset service providers maintaining full compliance with the rules and regulations in the jurisdictions in which they operate.
The FSB explains that, in addition to holding crypto companies accountable, “the FSB will continue to facilitate cross-border and cross-sector cooperation between national financial authorities and international standard-setting bodies as they work to develop a shared understanding of a wide range of crypto-assets, as well as regulatory and supervisory policies which are risk-based and technology-neutral and based on the principle of ‘same activity, same risk, same regulation’.”
This ‘same activity, same regulation’ strategy is often described by US Federal Reserve Chairman Jerome Powell when discussing crypto-asset regulation. The FSB will reportedly publish its recommendations for the regulation of cryptoassets in October this year.
Shanghai invests in metaverse development fund
Shanghai, China’s largest city, plans to accelerate its economic recovery by placing a long-term bet on the importance of blockchain, metaverse and other smart technologies. The investment fund will also emphasize projects that have low carbon consumption. Shanghai will do this by creating a Metaverse Development Fund in which the city is reportedly investing 10 billion yuan, equivalent to nearly $1.5 billion in USD. This money will be invested in the most promising projects and industry leaders to help drive their technological progress.
Wu Jincheng, who heads the Shanghai Economic and Information Technology Committee (EITC), noted at a press conference earlier this month the enormous market value of these technologies. The value and importance of these innovations will only grow in the coming years. Jicheng emphasized his belief that their investments in the proliferating metaverse “will drive the transformation and improvement of various industries in the real economy.”
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