(In this regard, the executive order reinforces the Financial Stability Oversight Council’s role in assessing financial stability risks and regulatory gaps, and preparing recommendations for addressing such risks.)

Protecting US and global financial stability and mitigating economywide financial risks: The executive order states that digital asset issuers, exchanges and trading platforms, service providers, and other industry participants “may not be subject to or in compliance with appropriate regulations or supervision.” Industry participants that present risks to financial stability should “be subject to and in compliance with … standards that govern traditional market infrastructures and financial firms,” although evolutionary changes to the current regulatory approach may be required.

Protecting US consumers, investors and businesses: The executive order expresses concern that the growing use of digital assets and firms providing digital asset services may present increased “risks of crimes such as fraud and theft, other statutory and regulatory violations, privacy and data breaches, unfair and abusive acts or practices, and other cyber incidents.” It further states that such risks may be heightened for less informed market participants.

The executive order outlines six key policy priorities. The executive order comes on the heels of other initiatives focused on digital assets, including the Department of Justice’s focus on cryptocurrency in both civil and criminal initiatives (such as its appointment of its first National Cryptocurrency Enforcement Team director), the Securities and Exchange Commission's (SEC) continued regulation by enforcement in this area, and recent commentary from the Consumer Financial Protection Bureau (CFPB) on the broader adoption of digital assets in consumer markets. To that end, shortly after the announcement of the executive order, several agencies issued statements echoing positions in the order.

It also encourages various US regulators to act within their respective jurisdictions. These actions include the submission of certain reports and regulatory and legislative proposals. The executive order requires coordination among, and actions to be taken by, numerous executive branch departments and agencies within specified timeframes. The executive order also states that the Biden administration places the “highest urgency” on further research into a potential US central bank digital currency (CBDC). However, while it is a crucial first step to addressing currently fragmented regulation, the executive order stops short of establishing a single policy for digital assets. To further demonstrate the necessity of the executive order, Congress remains sharply divided on a path forward on digital currency legislation. The executive order lays the groundwork for increased US regulation of digital assets.

Importantly, the executive order states that the Biden administration is interested in promoting responsible financial innovation and US leadership globally, including in the development of global standards for digital assets. On March 9, 2022, President Joe Biden issued an executive order outlining a “whole-of-government” approach to examining a broad range of potential risks associated with the dramatic growth in digital assets, including cryptocurrencies.

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