White House Digital Asset Framework


The White house released on September 16 a fact sheet on the United States government position and recommendations on Digital Assets. An estimated 16% of adult Americans, about 1 in 6, have purchased a Digital Asset which makes this a topic worthy of review. While nothing in the framework should come as a surprise, it does set a basis for how government agencies are going to spend their time and effort in both encouraging innovation and regulating the business of Digital Assets.

While we may think that Digital Assets such as cryptocurrencies are everywhere, they are still a recent innovation in their current state and in their infancy. A google search of cryptocurrency shows about 550 million results on the web. Search for “dollar” and you receive 3.5 billion results. Not that google is the end all, though it is a good barometer of a topics popularity on the Internet. Perspective also dictates we keep in mind the 2nd most google searched “How to be” statement in 2021 was “How to be more attractive?” Seems we have a long way to go as a society which is why government asked for recommendations and input.

Investors with no market knowledge or digital asset experience are susceptible to Digital Asset scams and many people have lost large sums of money or entire life savings betting on some of the offers made on the Internet. While we can debate whether government should protect us from ourselves, few will debate that government has some responsibility to protect the public and pursue scammers who create Ponzi schemes with empty offers of wealth via Digital Assets.

To this end, the White House published 6 key priorities identified from the various documents received from its request for information. These include:

  1. Consumer and investor protection
  2. Promoting financial stability
  3. Countering illicit finance
  4. U.S. leadership in the global financial system and economic competitiveness
  5. Financial inclusion
  6. Responsible innovation

Some of the report information submitted to the White House has been made available though not all. The documents I have read, either directly or from articles by others, indicate that there are still 2 camps. Those that are hawkish on regulation indicating protection is required. There is also a power grab motive to these hawks. And those that are dovish pushing for more innovation and a light touch by government. While not directly comparative, it reminds me of recent debates on clean energy and whether the government should actively get involved or keep a light touch and let the market push it through.

In a past article, I wrote about Central Bank Digital Currencies or CBDCs. Every government in the world is reviewing how to make a digital equivalent to their currency. Whether it’s for economic growth or better tracking of their citizens, this is being implemented. There will be a future where almost all daily transactions will be digital.

As I dive deeper into the guidance, I’ve also dived farther into the Howie Test. [see SEC v. W.J. Howey Co., 328 U.S. 293 (1946) (“Howey”)]. It is what the SEC uses to determine if an offering is a security. The 3 components are 1. An investment of money, 2. There is commonality in that all owners share results or fortunes, and 3. There is a reasonable expectation of profits based on the efforts of others.

Early buyers the Digital Asset Bitcoin did not trade or purchase them specifically to derive profits. They were getting into a new community where they could share in the development and use of the new technology. Though as usually happens when a technology shows value, its value started rising rapidly and the involvement of speculators and people who were looking at it as an investment grew. In this way, Digital Assets resemble both Schrödinger’s cat and Qubits. Digital Assets are both a security and not a security at the same time. And this is where both the SEC and the Digital Asset enthusiasts’ make their argument’s.

The guidance from the White House is needed. As only through the rule of law applied at the right time will new technologies continue to thrive. There is general agreement that Blockchain has value and that in general Digital Assets have value. Though a few luddites are still out there. Sheparding Digital Assets through the innovation stages of early adoption and early majority will take care. And there is still much debate, and legal definition, to be had in determining the fate of each one.

In general, I approve of the current guidance and believe it will assist in the discussion and debate. As we see more innovation in smaller countries who are able to move faster, we will see examples of this innovation and be able to learn. Today, we all should be curious about where this is heading as in the not too distant future, we will begin to see “digital only” transactions and digital ownership become reality.


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