White House Publishes "Comprehensive Framework For Responsible Development Of Digital Assets"

• Published date: 30 September 2022
• Subject Matter: Finance and Banking, Financial Services
• Law Firm: McCarthy Tétrault LLP
• Author: TechLex Blog, Ana Badour, Lori Stein and Jacob A. Robinson

On September 16, 2022, the White House released its Comprehensive Framework for Responsible Development of Digital Assets, the first step in its "whole-of-government" strategy on regulating digital assets. This framework is a result of President Biden's Executive Order, signed in March 2022, which instructed US government agencies to produce various reports, studies and policy recommendations for the responsible development of digital assets. The order specified research in seven key areas, such as illicit finance, consumer protection, and US leadership in the global financial system. For a detailed review of these priorities, read our blog post on President Biden's Executive Order.

The executive order culminated in nine reports from various agencies, including the Treasury Department and Department of Justice (DOJ). The most pertinent takeaways from these reports are outlined below.

The DOJ's report discusses the role of law enforcement with respect to digital asset criminal activity. The DOJ proposes three policy changes aimed at combatting financial crime: (1) extending laws relating to the tipping-off of investigation suspects to virtual asset services providers; (2) improved enforcement efforts against operations involved in unlicensed money transmission; and 3) lengthening certain statutory limitation periods to mitigate complexities in digital asset transactions. The DOJ also describes investigative challenges posed by digital assets, which it proposes to mitigate by establishing a group of federal prosecutors focused on training and expertise in the digital asset space.

The Treasury Department published three reports addressing illicit finance risk, consumer and investor protection, and the future of money and payment systems.

• The Illicit Finance Report is focused on addressing gaps in existing anti-money laundering (AML) and countering the financing of terrorism (CFT) regimes. The report highlights the need for global AML regulation and enforcement, as "criminal organizations are often the perpetrators of ransomware crimes, leveraging global infrastructure and money laundering network to carry out their attacks." The Treasury undertakes to complete an illicit finance risk assessment on decentralized finance (DeFi) by the end of February 2023 and an assessment of non-fungible tokens (NFTs) by July 2023. President Biden will also evaluate whether to call upon Congress to amend the Bank Secrecy Act (BSA), anti-tip-off statutes, and laws against...