The White House delivered its executive order outlining the approach to digital currencies today. Not much detail and not much that wasn’t expected though it is worthy of review.
The order described Six (6) key priorities for the administration to focus on further define policy on. I’ll go thru each with a comment.
“Protect U.S. Consumers, Investors, and Businesses”
Here the Treasury and other agencies are to protect the financial community as they do with securities and other financial assets. Even as a digital currency supporter, I acknowledge that there has been considerable fraud. This was to be expected with any new technology as it was, for example, when the Internet first started. This means reasonable regulation and not overkill that also kills what is good with those that would take advantage of it.
“Protect U.S. and Global Financial Stability and Mitigate Systemic Risk”
Here the order asks the Financial Stability Oversight Council to identify and mitigate economy-wide (i.e., systemic) financial risks. The interpretation of this will determine if it’s good, bad, or just ugly. Digital currencies by design, are meant not to be manipulated. Though they are today due to limited uptake, when they are truly distributed, it will be much more difficult. Manipulation of government FIAT currency by Central banks is one way they maintain stability. There needs to be much debate and discussion about how to replace their FIAT manipulation in a decentralized monetary system offered by digital currencies.
“Mitigate the Illicit Finance and National Security Risks Posed by the Illicit Use of Digital Assets”
Digital currencies do have some illicit pasts. Let’s acknowledge this and move on to how to develop the international frameworks, capabilities, and partnerships that are required to be aligned and responsive to these risks. This doesn’t mean we need to be overly burdensome. It means that at the onramps and offramps to the digital currency we need the same controls we have today with KYC and financial institutions.
“Promote U.S. Leadership in Technology and Economic Competitiveness to Reinforce U.S. Leadership in the Global Financial System”
This is the most exciting one of the directives to me. While the USA has lagged in its promotion, it has the culture and the means to be the global leader in digital assets and currencies. While we may see the dollar decline as the global reserve currency in years to come, the USA can a leadership role in digital assets and maintain a USA role in a global reserve currency for decades and even centuries.
“Promote Equitable Access to Safe and Affordable Financial Services”
Universal access to safe and affordable financial services is in the national interest. I absolutely agree. The Secretary of the Treasury is asked to produce a report on the future of money and payment systems. Though I see a lot of bias by default, we should work to ensure that the report that is developed is a fair outline not just looking back at the control of the monetary system, but looking forward to creating a system that is safe and affordable for ALL CITIZENS.
“Support Technological Advances and Ensure Responsible Development and Use of Digital Assets”
I jumped right to the last line in this one which includes “reducing negative climate impacts.” This topic has come up often lately. And it is primarily centered on the way some digital assets are mined. While proof of work was a good starting technology and though complex was the easiest to implement to start. There are some really good proof of stake and other technologies that do not affect the climate like the initial mining of Bitcoin. If reviewed fairly, this should be an easy one to address and report on.
“Explore a U.S. Central Bank Digital Currency (CBDC).”
With the wide use of the USA Dollar, this is not an easy task though there are several “Stable coins” that currently could be considered equal to a CBDC. I would say that most digital asset owners, would welcome a USA federal reserve backed digital currency. Though it doesn’t fix the manipulation that is possible, it certainly would be easier to use than cash and promote familiarity and trust with digital currencies by the mass market. Which is a step in the right direction.
While these are my initial thoughts, as I gather more details, I’ll enhance this or add another post. This certainly is a market in transition that still has plenty of growth before it starts to settle. Just the type of market that I like to follow and participate in.