On March 9, 2022, the White House issued a much-anticipated executive order formulating US policy for digital assets. fact sheet The US identifies six key priorities focused on competitiveness, central bank digital currencies (CBDCs) and proactive legislation. The order is a thoughtful approach to integrating crypto into the US economy. It’s not as bad as some feared and not as widespread as some had hoped.
The Administration acknowledges the fact that noting the huge growth in the digital asset markets:
- Digital asset market capitalization increased from $14 billion to $3 trillion in five years;
- 16% of US adults (40 million people) have invested in cryptocurrencies; And
- More than 100 countries are exploring Central Bank Digital Currency (CBDC).
The emerging digital asset market is seen as an opportunity to consolidate US leadership in the global financial system and technology industry. As the world’s most powerful economy, acceptance of crypto as a growing industry is critical to maintaining US global competitiveness in the financial industry.
American financial and technological heritage
Since World War II, the US has a legacy of being a global leader in finance and technology, being the progenitor of the digital asset industry. Despite this major debut, US regulation of digital assets remains disorganized and uncertain. This uneven approach has led companies to form crypto ventures in countries such as Portugal and Singapore, which have taken advantage of this uncertainty by offering regulatory clarity as well as tax breaks and other incentives. The executive order is a positive sign that this regulatory ambiguity may be over. Such regulatory certainty would also help define how digital assets are handled from a transfer tax perspective and issues such as whether trusts can hold digital assets.
Central Bank Digital Currencies (CBDC)
Biden’s order also encourages research and development of a United States CBDC with the “highest urgency.” A US CBDC would be a major step forward in the advancement of crypto as a mainstream technology, as it could help maintain the dollar as the world’s reserve currency. With more than 100 countries operating or exploring CBDCs, the US has the opportunity to maintain its position as a global leader in finance by developing smartly crafted policies and regulations, an opportunity that can be seen even more. given with greater urgency. Russia’s invasion of Ukraine and the importance of financial sanctions as a tool in international affairs.
Limiting structural risks to the financial system and protecting investor privacy are the focus for potentially proactive legislation. However, there is a danger that poorly designed regulations will have unintended consequences that not only hinder future innovation or further development of these offshore technologies, but actually harm individual rights and the harmony of the financial system as a whole. terminate. However, the absolute lack of regulatory clarity that now exists threatens to undermine the governance of traditional financial markets, developed and refined for decades.
However, it’s important to note what an executive order does and doesn’t do.
executive Order does not,
- Take any direct action to restrict or reduce the use of crypto;
- establish any government body; Sleep
- Formally established in the Central Bank digital currency.
executive Order does,
- Acknowledge that crypto is tied to US financial and technological leadership;
- Acknowledge the potential of crypto to provide access to financial services for underserved communities; And
- Broadly direct the US government to support technological advances in digital currencies and to continue research into central bank digital currencies.
With the growth and regulation of the digital asset sector in the US a more proactive approach is the acceptance of hundreds of thousands of investors who want to adopt crypto and Web 3.0 in the US markets. No direct action has been taken. Government agencies have 120 to 210 days to establish a framework for each of the key areas of focus.
Despite the lack of direct action, there is optimism in the market that investment in crypto in the US will continue to grow. As the government recognizes that the emerging digital asset industry is critical to sustaining global competitiveness in finance and technology, advisors should also recognize and address the tax and administrative issues raised by individual ownership of digital assets. Must take advantage.
Matthew Erskine is the Managing Partner at Erskine & Erskine (www.erskineco.com).