President Biden’s March 9 executive order requested comprehensive research on digital assets and a potential US central bank digital currency (CBDC) from a host of government agencies. The outcomes of these reports are likely to impact US financial systems — and deadlines are fast approaching.
Domestically and abroad, Biden’s administration has felt mounting pressure to wrap its head around digital assets. They pose substantial potential threats to national security, climate change, privacy, the economy, consumers, businesses, and more. Yet the potential opportunities are also real, particularly to financial inclusion and efficiency.
The President’s executive order seeks clarity on how to mitigate these risks. It demands to know what laws, infrastructure, and resources are needed to lead the charge in global digital asset regulation and whether the benefits of adopting its own CBDC outweigh the risks.
These reports will likely cause significant implications for future US legislation and could have countless knock-on effects for consumers, investors, and businesses.
So it’s no surprise the executive order is, well, a rather tall one. The lengthy document commands the issuance of a total of 13 official reports. The first is due June 7 – Protos has broken down the upcoming deadlines to see what’s in store.
First, we summarize reports in the order they appear in the document. At the end, a short list is divided by the agency in charge.
CBDCs: The future of money and payment systems
In section 4b, Biden’s executive order commands Secretary of the Treasury Janet Yellen and her team to work with other leading financial agencies to establish the past, present, and future of payment systems in the US and assess their potential impact on its economy.
The report, due September 5, will answer questions like:
- What drives adoption of digital assets?
- How much do tech innovations influence these outcomes?
- What are the implications of digital asset adoption for the US finance system?
It will also assess the evolution of “payment systems, economic growth, financial inclusion, and national security.”
The report will include analyses on a US CBDC, particularly:
- Its potential impact on the country’s economic growth, financial inclusion, democracy, as well as on existing currencies and payment systems.
- The extent to which a CBDC would impact national security and financial crimes.
- The executive order specifically calls for an analysis of sanctions risks and potential impact on human rights.
Biden’s administration has also asked Yellen and her team to assess “the effects that the growth of foreign CBDCs may have on US interests generally.”
CBDC implementation through legislation
Section 4c of Biden’s executive order is not a request for a specific report, but it does encourage the Chairman of the Federal Reserve, Jerome Powell, to continually analyze how CBDCs could improve financial infrastructure. The US President further asks Powell and his office to figure out what that process of adoption would look like.
In conjunction, in a report due September 5, the Attorney General Merrick B. Garland is to ascertain whether existing US legal frameworks would need to change in order to issue a CBDC (4d). And by October 5, Garland must propose legislation for CBDC adoption — based on Yellen and Powell’s assessments.
How to protect consumers, investors, and businesses
Biden’s executive order establishes the need to safeguard against and mitigate risks posed by digital assets.
By September 5, Yellen must present a tangential report (5bi) to the one from section 4b. Specifically, this report will address the implications of adopting digital assets in terms of risks to consumers, investors, and businesses.
It will further tackle the conditions needed for mass adoption of various digital assets to occur, and expand upon:
- Risks and opportunities of adoption, particularly to those “most vulnerable to disparate impacts” as well as the unbanked.
- Policy recommendations to protect businesses and investors.
Resources needed for implementation
Biden would also like a comprehensive breakdown of what tools and resources are needed to actually launch a CBDC (section 5bii).
He’s tasked the Director of the Office of Science and Technology Policy, Dr. Alondra Nelson, with this report. Interestingly, Biden also assigned it to the Chief Technology Officer of the United States — but the role has been vacant since Biden assumed office in 2021.
By September 5, Biden has requested to learn about:
- Technological infrastructure, capacity, and expertise needs.
- Technical risks, particularly taking into account future tech like quantum computing.
- How digital assets would affect the work of the government and its services.
Due at the same time is a report by Garland covering how law enforcement agencies can root out and prosecute criminal activity using crypto (section 5biii).
Finally, as far as consumer protection goes, Biden wants to learn how crypto will impact the environment. Specifically, how the US can mitigate crypto’s energy requirements. Nelson must submit this report along with the one outlined in section 5bii and pay close attention to:
- How blockchain tech could help monitor or mitigate climate change.
- How crypto adoption would impact energy infrastructure.
Nelson must also update this report a year after submitting it, to include any developments in tech.
Financial stability risks and regulatory gaps
In section six, Biden’s administration acknowledges finance regulators like the SEC and the role they play in protecting the national economy.
The executive order further explains that for the past five years, the Secretary of the Treasury has brought together the FSOC to discuss and tackle current risks. Yellen currently serves as its chairperson. Other members include Gary Gensler, Chairman of the SEC, and Daniel J. Hsu, Comptroller of the Currency.
By October 5, Yellen should convene the FSOC and outline the risks and gaps in regulation that various digital assets pose. She’ll also recommend ways to address them.
Criminal activity and national security risks
Section seven outlines the need to explore opportunities to mitigate risks through “regulation, supervision, public-private engagement, oversight, and law enforcement.”
It invites a host of government agency leaders, including Yellen, Garland, the Director of National Intelligence, and the Secretary of Homeland Security, to each submit any material they want on criminal risks posed by digital assets (7b).
Within 120 days of the submittal of the National Strategy for Combating Terrorist and Other Illicit Financing, which occurred on May 13, Yellen and a host of agencies must submit a “coordinated action plan” for tempering crypto crimes and risks (7c, our emphasis).
International cooperation (but also, how to ensure the US is best)
Biden’s executive order outlines his administration’s views on how to simultaneously work with other authorities while maintaining a competitive advantage.
“While the United States held the position of President of the FATF [Financial Action Task Force], the United States led the group in developing and adopting the first international standards on digital assets,” the lengthy document states.
Biden commands Yellen and several others to establish how to work with relevant agencies and their international counterparts to further promote and evolve digital asset regulation (8bi).
A year later, Yellen et al. must follow up with Biden to explain how that framework has unfolded (8bii).
Finally, the Treasury of Commerce Gina Raimondo must outline how the country can “enhance US economic competitiveness in, and leveraging of, digital asset technologies.” The report is due September 5.
Full list of executive order requests, by office responsible
Secretary of the Treasury Janet Yellen’s office must spearhead six reports this year, the most of any agency mentioned in the executive order. She’s been asked by the President to follow up on her July 7 report outlined below on the same date in 2023.
Furthermore, the executive order states Yellen must submit a “coordinated action plan” to crack down on criminal activity involving digital assets, 120 days after the National Strategy for Combating Terrorist and Other Illicit Financing is submitted. The report was published on May 13, giving Yellen’s office a deadline of September 13.
Yellen’s deadlines this year:
- July 7: by this time, Yellen must propose how US agencies and their foreign counterparts can adopt standards for digital asset use and promoting CBDC tech legally (section 8bi).
- September 5: a report is due on the potential impacts of a national CBDC (4b).
- September 5: another on the risks and regulatory requirements of digital asset mass adoption (5bi).
- September 10: on this date, all relevant agencies should be notified by Yellen of all rules regarding illicit finance — pending, prospective, or proposed (7c).
- October 5: Yellen must convene the Financial Stability Oversight Council) FSOC and share specific proposals for regulation and legislation of digital assets (6b).
Attorney General Merrick B. Garland has four report deadlines looming in 2022:
- June 7: the President will expect him to detail how international law enforcement can better work together to tackle crypto crime (8biv).
- September 5: a statement on law enforcement’s role in investigating and prosecuting digital asset crimes is due (5biii).
- September 5: by this time, an outline of legislative changes needed for the US to issue a CBDC is due (4di).
- October 5: a month later, Garland should share specifics on how to make those changes (4dii).
Director of the Office of Science and Technology Policy, Dr. Alondra Nelson, and her office must share two reports this year, and follow up on one within a year.
- September 5: share a report on the technology requirements for issuing a CBDC and its supporting infrastructure, including risk assessment (5bii).
- September 5: another on the impacts of blockchain tech on climate change and energy infrastructure, as well as a follow up report the next year to account for recent advancements in tech (5bvii).
Finally, Secretary of Commerce Gina Raimondo is tasked with just one report in the executive order. However, it’s likely to keep her busy – by September 5, she must establish a “framework for enhancing US economic competitiveness in, and leveraging of, digital asset technologies.” The Secretary of State Antony Blinken and Yellen will consult (8biii).