Ensuring Responsible Development of Digital Assets, 14143-14152 [2022-05471]

Download as PDF 14143 Presidential Documents Federal Register Vol. 87, No. 49 Monday, March 14, 2022 Title 3— Executive Order 14067 of March 9, 2022 The President Ensuring Responsible Development of Digital Assets By the authority vested in me as President by the Constitution and the laws of the United States of America, it is hereby ordered as follows: Section 1. Policy. Advances in digital and distributed ledger technology for financial services have led to dramatic growth in markets for digital assets, with profound implications for the protection of consumers, investors, and businesses, including data privacy and security; financial stability and systemic risk; crime; national security; the ability to exercise human rights; financial inclusion and equity; and energy demand and climate change. In November 2021, non–state issued digital assets reached a combined market capitalization of $3 trillion, up from approximately $14 billion in early November 2016. Monetary authorities globally are also exploring, and in some cases introducing, central bank digital currencies (CBDCs). While many activities involving digital assets are within the scope of existing domestic laws and regulations, an area where the United States has been a global leader, growing development and adoption of digital assets and related innovations, as well as inconsistent controls to defend against certain key risks, necessitate an evolution and alignment of the United States Government approach to digital assets. The United States has an interest in responsible financial innovation, expanding access to safe and affordable financial services, and reducing the cost of domestic and cross-border funds transfers and payments, including through the continued modernization of public payment systems. We must take strong steps to reduce the risks that digital assets could pose to consumers, investors, and business protections; financial stability and financial system integrity; combating and preventing crime and illicit finance; national security; the ability to exercise human rights; financial inclusion and equity; and climate change and pollution. jspears on DSK121TN23PROD with PREZ DOC Sec. 2. Objectives. The principal policy objectives of the United States with respect to digital assets are as follows: (a) We must protect consumers, investors, and businesses in the United States. The unique and varied features of digital assets can pose significant financial risks to consumers, investors, and businesses if appropriate protections are not in place. In the absence of sufficient oversight and standards, firms providing digital asset services may provide inadequate protections for sensitive financial data, custodial and other arrangements relating to customer assets and funds, or disclosures of risks associated with investment. Cybersecurity and market failures at major digital asset exchanges and trading platforms have resulted in billions of dollars in losses. The United States should ensure that safeguards are in place and promote the responsible development of digital assets to protect consumers, investors, and businesses; maintain privacy; and shield against arbitrary or unlawful surveillance, which can contribute to human rights abuses. (b) We must protect United States and global financial stability and mitigate systemic risk. Some digital asset trading platforms and service providers have grown rapidly in size and complexity and may not be subject to or in compliance with appropriate regulations or supervision. Digital asset issuers, exchanges and trading platforms, and intermediaries whose activities may increase risks to financial stability, should, as appropriate, be subject to and in compliance with regulatory and supervisory standards that govern traditional market infrastructures and financial firms, in line with the general VerDate Sep<11>2014 15:38 Mar 11, 2022 Jkt 256001 PO 00000 Frm 00001 Fmt 4705 Sfmt 4790 E:\FR\FM\14MRE0.SGM 14MRE0 14144 Federal Register / Vol. 87, No. 49 / Monday, March 14, 2022 / Presidential Documents principle of ‘‘same business, same risks, same rules.’’ The new and unique uses and functions that digital assets can facilitate may create additional economic and financial risks requiring an evolution to a regulatory approach that adequately addresses those risks. (c) We must mitigate the illicit finance and national security risks posed by misuse of digital assets. Digital assets may pose significant illicit finance risks, including money laundering, cybercrime and ransomware, narcotics and human trafficking, and terrorism and proliferation financing. Digital assets may also be used as a tool to circumvent United States and foreign financial sanctions regimes and other tools and authorities. Further, while the United States has been a leader in setting international standards for the regulation and supervision of digital assets for anti–money laundering and countering the financing of terrorism (AML/CFT), poor or nonexistent implementation of those standards in some jurisdictions abroad can present significant illicit financing risks for the United States and global financial systems. Illicit actors, including the perpetrators of ransomware incidents and other cybercrime, often launder and cash out of their illicit proceeds using digital asset service providers in jurisdictions that have not yet effectively implemented the international standards set by the inter-governmental Financial Action Task Force (FATF). The continued availability of service providers in jurisdictions where international AML/CFT standards are not effectively implemented enables financial activity without illicit finance controls. Growth in decentralized financial ecosystems, peer-to-peer payment activity, and obscured blockchain ledgers without controls to mitigate illicit finance could also present additional market and national security risks in the future. The United States must ensure appropriate controls and accountability for current and future digital assets systems to promote high standards for transparency, privacy, and security—including through regulatory, governance, and technological measures—that counter illicit activities and preserve or enhance the efficacy of our national security tools. When digital assets are abused or used in illicit ways, or undermine national security, it is in the national interest to take actions to mitigate these illicit finance and national security risks through regulation, oversight, law enforcement action, or use of other United States Government authorities. jspears on DSK121TN23PROD with PREZ DOC (d) We must reinforce United States leadership in the global financial system and in technological and economic competitiveness, including through the responsible development of payment innovations and digital assets. The United States has an interest in ensuring that it remains at the forefront of responsible development and design of digital assets and the technology that underpins new forms of payments and capital flows in the international financial system, particularly in setting standards that promote: democratic values; the rule of law; privacy; the protection of consumers, investors, and businesses; and interoperability with digital platforms, legacy architecture, and international payment systems. The United States derives significant economic and national security benefits from the central role that the United States dollar and United States financial institutions and markets play in the global financial system. Continued United States leadership in the global financial system will sustain United States financial power and promote United States economic interests. (e) We must promote access to safe and affordable financial services. Many Americans are underbanked and the costs of cross-border money transfers and payments are high. The United States has a strong interest in promoting responsible innovation that expands equitable access to financial services, particularly for those Americans underserved by the traditional banking system, including by making investments and domestic and crossborder funds transfers and payments cheaper, faster, and safer, and by promoting greater and more cost-efficient access to financial products and services. The United States also has an interest in ensuring that the benefits of financial innovation are enjoyed equitably by all Americans and that any disparate impacts of financial innovation are mitigated. VerDate Sep<11>2014 15:38 Mar 11, 2022 Jkt 256001 PO 00000 Frm 00002 Fmt 4705 Sfmt 4790 E:\FR\FM\14MRE0.SGM 14MRE0 Federal Register / Vol. 87, No. 49 / Monday, March 14, 2022 / Presidential Documents 14145 (f) We must support technological advances that promote responsible development and use of digital assets. The technological architecture of different digital assets has substantial implications for privacy, national security, the operational security and resilience of financial systems, climate change, the ability to exercise human rights, and other national goals. The United States has an interest in ensuring that digital asset technologies and the digital payments ecosystem are developed, designed, and implemented in a responsible manner that includes privacy and security in their architecture, integrates features and controls that defend against illicit exploitation, and reduces negative climate impacts and environmental pollution, as may result from some cryptocurrency mining. Sec. 3. Coordination. The Assistant to the President for National Security Affairs (APNSA) and the Assistant to the President for Economic Policy (APEP) shall coordinate, through the interagency process described in National Security Memorandum 2 of February 4, 2021 (Renewing the National Security Council System), the executive branch actions necessary to implement this order. The interagency process shall include, as appropriate: the Secretary of State, the Secretary of the Treasury, the Secretary of Defense, the Attorney General, the Secretary of Commerce, the Secretary of Labor, the Secretary of Energy, the Secretary of Homeland Security, the Administrator of the Environmental Protection Agency, the Director of the Office of Management and Budget, the Director of National Intelligence, the Director of the Domestic Policy Council, the Chair of the Council of Economic Advisers, the Director of the Office of Science and Technology Policy, the Administrator of the Office of Information and Regulatory Affairs, the Director of the National Science Foundation, and the Administrator of the United States Agency for International Development. Representatives of other executive departments and agencies (agencies) and other senior officials may be invited to attend interagency meetings as appropriate, including, with due respect for their regulatory independence, representatives of the Board of Governors of the Federal Reserve System, the Consumer Financial Protection Bureau (CFPB), the Federal Trade Commission (FTC), the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and other Federal regulatory agencies. jspears on DSK121TN23PROD with PREZ DOC Sec. 4. Policy and Actions Related to United States Central Bank Digital Currencies. (a) The policy of my Administration on a United States CBDC is as follows: (i) Sovereign money is at the core of a well-functioning financial system, macroeconomic stabilization policies, and economic growth. My Administration places the highest urgency on research and development efforts into the potential design and deployment options of a United States CBDC. These efforts should include assessments of possible benefits and risks for consumers, investors, and businesses; financial stability and systemic risk; payment systems; national security; the ability to exercise human rights; financial inclusion and equity; and the actions required to launch a United States CBDC if doing so is deemed to be in the national interest. (ii) My Administration sees merit in showcasing United States leadership and participation in international fora related to CBDCs and in multicountry conversations and pilot projects involving CBDCs. Any future dollar payment system should be designed in a way that is consistent with United States priorities (as outlined in section 4(a)(i) of this order) and democratic values, including privacy protections, and that ensures the global financial system has appropriate transparency, connectivity, and platform and architecture interoperability or transferability, as appropriate. (iii) A United States CBDC may have the potential to support efficient and low-cost transactions, particularly for cross-border funds transfers and payments, and to foster greater access to the financial system, with fewer of the risks posed by private sector-administered digital assets. A United States CBDC that is interoperable with CBDCs issued by other monetary VerDate Sep<11>2014 15:38 Mar 11, 2022 Jkt 256001 PO 00000 Frm 00003 Fmt 4705 Sfmt 4790 E:\FR\FM\14MRE0.SGM 14MRE0 14146 Federal Register / Vol. 87, No. 49 / Monday, March 14, 2022 / Presidential Documents authorities could facilitate faster and lower-cost cross-border payments and potentially boost economic growth, support the continued centrality of the United States within the international financial system, and help to protect the unique role that the dollar plays in global finance. There are also, however, potential risks and downsides to consider. We should prioritize timely assessments of potential benefits and risks under various designs to ensure that the United States remains a leader in the international financial system. (b) Within 180 days of the date of this order, the Secretary of the Treasury, in consultation with the Secretary of State, the Attorney General, the Secretary of Commerce, the Secretary of Homeland Security, the Director of the Office of Management and Budget, the Director of National Intelligence, and the heads of other relevant agencies, shall submit to the President a report on the future of money and payment systems, including the conditions that drive broad adoption of digital assets; the extent to which technological innovation may influence these outcomes; and the implications for the United States financial system, the modernization of and changes to payment systems, economic growth, financial inclusion, and national security. This report shall be coordinated through the interagency process described in section 3 of this order. Based on the potential United States CBDC design options, this report shall include an analysis of: (i) the potential implications of a United States CBDC, based on the possible design choices, for national interests, including implications for economic growth and stability; (ii) the potential implications a United States CBDC might have on financial inclusion; (iii) the potential relationship between a CBDC and private sector-administered digital assets; (iv) the future of sovereign and privately produced money globally and implications for our financial system and democracy; (v) the extent to which foreign CBDCs could displace existing currencies and alter the payment system in ways that could undermine United States financial centrality; (vi) the potential implications for national security and financial crime, including an analysis of illicit financing risks, sanctions risks, other law enforcement and national security interests, and implications for human rights; and jspears on DSK121TN23PROD with PREZ DOC (vii) an assessment of the effects that the growth of foreign CBDCs may have on United States interests generally. (c) The Chairman of the Board of Governors of the Federal Reserve System (Chairman of the Federal Reserve) is encouraged to continue to research and report on the extent to which CBDCs could improve the efficiency and reduce the costs of existing and future payments systems, to continue to assess the optimal form of a United States CBDC, and to develop a strategic plan for Federal Reserve and broader United States Government action, as appropriate, that evaluates the necessary steps and requirements for the potential implementation and launch of a United States CBDC. The Chairman of the Federal Reserve is also encouraged to evaluate the extent to which a United States CBDC, based on the potential design options, could enhance or impede the ability of monetary policy to function effectively as a critical macroeconomic stabilization tool. (d) The Attorney General, in consultation with the Secretary of the Treasury and the Chairman of the Federal Reserve, shall: (i) within 180 days of the date of this order, provide to the President through the APNSA and APEP an assessment of whether legislative changes would be necessary to issue a United States CBDC, should it be deemed appropriate and in the national interest; and VerDate Sep<11>2014 15:38 Mar 11, 2022 Jkt 256001 PO 00000 Frm 00004 Fmt 4705 Sfmt 4790 E:\FR\FM\14MRE0.SGM 14MRE0 Federal Register / Vol. 87, No. 49 / Monday, March 14, 2022 / Presidential Documents 14147 (ii) within 210 days of the date of this order, provide to the President through the APNSA and the APEP a corresponding legislative proposal, based on consideration of the report submitted by the Secretary of the Treasury under section 4(b) of this order and any materials developed by the Chairman of the Federal Reserve consistent with section 4(c) of this order. Sec. 5. Measures to Protect Consumers, Investors, and Businesses. (a) The increased use of digital assets and digital asset exchanges and trading platforms may increase the 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 faced by consumers, investors, and businesses. The rise in use of digital assets, and differences across communities, may also present disparate financial risk to less informed market participants or exacerbate inequities. It is critical to ensure that digital assets do not pose undue risks to consumers, investors, or businesses, and to put in place protections as a part of efforts to expand access to safe and affordable financial services. (b) Consistent with the goals stated in section 5(a) of this order: jspears on DSK121TN23PROD with PREZ DOC (i) Within 180 days of the date of this order, the Secretary of the Treasury, in consultation with the Secretary of Labor and the heads of other relevant agencies, including, as appropriate, the heads of independent regulatory agencies such as the FTC, the SEC, the CFTC, Federal banking agencies, and the CFPB, shall submit to the President a report, or section of the report required by section 4 of this order, on the implications of developments and adoption of digital assets and changes in financial market and payment system infrastructures for United States consumers, investors, businesses, and for equitable economic growth. One section of the report shall address the conditions that would drive mass adoption of different types of digital assets and the risks and opportunities such growth might present to United States consumers, investors, and businesses, including a focus on how technological innovation may impact these efforts and with an eye toward those most vulnerable to disparate impacts. The report shall also include policy recommendations, including potential regulatory and legislative actions, as appropriate, to protect United States consumers, investors, and businesses, and support expanding access to safe and affordable financial services. The report shall be coordinated through the interagency process described in section 3 of this order. (ii) Within 180 days of the date of this order, the Director of the Office of Science and Technology Policy and the Chief Technology Officer of the United States, in consultation with the Secretary of the Treasury, the Chairman of the Federal Reserve, and the heads of other relevant agencies, shall submit to the President a technical evaluation of the technological infrastructure, capacity, and expertise that would be necessary at relevant agencies to facilitate and support the introduction of a CBDC system should one be proposed. The evaluation should specifically address the technical risks of the various designs, including with respect to emerging and future technological developments, such as quantum computing. The evaluation should also include any reflections or recommendations on how the inclusion of digital assets in Federal processes may affect the work of the United States Government and the provision of Government services, including risks and benefits to cybersecurity, customer experience, and social-safety-net programs. The evaluation shall be coordinated through the interagency process described in section 3 of this order. (iii) Within 180 days of the date of this order, the Attorney General, in consultation with the Secretary of the Treasury and the Secretary of Homeland Security, shall submit to the President a report on the role of law enforcement agencies in detecting, investigating, and prosecuting criminal activity related to digital assets. The report shall include any recommendations on regulatory or legislative actions, as appropriate. VerDate Sep<11>2014 15:38 Mar 11, 2022 Jkt 256001 PO 00000 Frm 00005 Fmt 4705 Sfmt 4790 E:\FR\FM\14MRE0.SGM 14MRE0 14148 Federal Register / Vol. 87, No. 49 / Monday, March 14, 2022 / Presidential Documents (iv) The Attorney General, the Chair of the FTC, and the Director of the CFPB are each encouraged to consider what, if any, effects the growth of digital assets could have on competition policy. (v) The Chair of the FTC and the Director of the CFPB are each encouraged to consider the extent to which privacy or consumer protection measures within their respective jurisdictions may be used to protect users of digital assets and whether additional measures may be needed. (vi) The Chair of the SEC, the Chairman of the CFTC, the Chairman of the Federal Reserve, the Chairperson of the Board of Directors of the Federal Deposit Insurance Corporation, and the Comptroller of the Currency are each encouraged to consider the extent to which investor and market protection measures within their respective jurisdictions may be used to address the risks of digital assets and whether additional measures may be needed. (vii) Within 180 days of the date of this order, the Director of the Office of Science and Technology Policy, in consultation with the Secretary of the Treasury, the Secretary of Energy, the Administrator of the Environmental Protection Agency, the Chair of the Council of Economic Advisers, the Assistant to the President and National Climate Advisor, and the heads of other relevant agencies, shall submit a report to the President on the connections between distributed ledger technology and short-, medium-, and long-term economic and energy transitions; the potential for these technologies to impede or advance efforts to tackle climate change at home and abroad; and the impacts these technologies have on the environment. This report shall be coordinated through the interagency process described in section 3 of this order. The report should also address the effect of cryptocurrencies’ consensus mechanisms on energy usage, including research into potential mitigating measures and alternative mechanisms of consensus and the design tradeoffs those may entail. The report should specifically address: (A) potential uses of blockchain that could support monitoring or mitigating technologies to climate impacts, such as exchanging of liabilities for greenhouse gas emissions, water, and other natural or environmental assets; and jspears on DSK121TN23PROD with PREZ DOC (B) implications for energy policy, including as it relates to grid management and reliability, energy efficiency incentives and standards, and sources of energy supply. (viii) Within 1 year of submission of the report described in section 5(b)(vii) of this order, the Director of the Office of Science and Technology Policy, in consultation with the Secretary of the Treasury, the Secretary of Energy, the Administrator of the Environmental Protection Agency, the Chair of the Council of Economic Advisers, and the heads of other relevant agencies, shall update the report described in section 5(b)(vii) of this order, including to address any knowledge gaps identified in such report. Sec. 6. Actions to Promote Financial Stability, Mitigate Systemic Risk, and Strengthen Market Integrity. (a) Financial regulators—including the SEC, the CFTC, and the CFPB and Federal banking agencies—play critical roles in establishing and overseeing protections across the financial system that safeguard its integrity and promote its stability. Since 2017, the Secretary of the Treasury has convened the Financial Stability Oversight Council (FSOC) to assess the financial stability risks and regulatory gaps posed by the ongoing adoption of digital assets. The United States must assess and take steps to address risks that digital assets pose to financial stability and financial market integrity. (b) Within 210 days of the date of this order, the Secretary of the Treasury should convene the FSOC and produce a report outlining the specific financial stability risks and regulatory gaps posed by various types of digital assets and providing recommendations to address such risks. As the Secretary VerDate Sep<11>2014 15:38 Mar 11, 2022 Jkt 256001 PO 00000 Frm 00006 Fmt 4705 Sfmt 4790 E:\FR\FM\14MRE0.SGM 14MRE0 Federal Register / Vol. 87, No. 49 / Monday, March 14, 2022 / Presidential Documents 14149 of the Treasury and the FSOC deem appropriate, the report should consider the particular features of various types of digital assets and include recommendations that address the identified financial stability risks posed by these digital assets, including any proposals for additional or adjusted regulation and supervision as well as for new legislation. The report should take account of the prior analyses and assessments of the FSOC, agencies, and the President’s Working Group on Financial Markets, including the ongoing work of the Federal banking agencies, as appropriate. Sec. 7. Actions to Limit Illicit Finance and Associated National Security Risks. (a) Digital assets have facilitated sophisticated cybercrime-related financial networks and activity, including through ransomware activity. The growing use of digital assets in financial activity heightens risks of crimes such as money laundering, terrorist and proliferation financing, fraud and theft schemes, and corruption. These illicit activities highlight the need for ongoing scrutiny of the use of digital assets, the extent to which technological innovation may impact such activities, and exploration of opportunities to mitigate these risks through regulation, supervision, public-private engagement, oversight, and law enforcement. (b) Within 90 days of submission to the Congress of the National Strategy for Combating Terrorist and Other Illicit Financing, the Secretary of the Treasury, the Secretary of State, the Attorney General, the Secretary of Commerce, the Secretary of Homeland Security, the Director of the Office of Management and Budget, the Director of National Intelligence, and the heads of other relevant agencies may each submit to the President supplemental annexes, which may be classified or unclassified, to the Strategy offering additional views on illicit finance risks posed by digital assets, including cryptocurrencies, stablecoins, CBDCs, and trends in the use of digital assets by illicit actors. jspears on DSK121TN23PROD with PREZ DOC (c) Within 120 days of submission to the Congress of the National Strategy for Combating Terrorist and Other Illicit Financing, the Secretary of the Treasury, in consultation with the Secretary of State, the Attorney General, the Secretary of Commerce, the Secretary of Homeland Security, the Director of the Office of Management and Budget, the Director of National Intelligence, and the heads of other relevant agencies shall develop a coordinated action plan based on the Strategy’s conclusions for mitigating the digital-assetrelated illicit finance and national security risks addressed in the updated strategy. This action plan shall be coordinated through the interagency process described in section 3 of this order. The action plan shall address the role of law enforcement and measures to increase financial services providers’ compliance with AML/CFT obligations related to digital asset activities. (d) Within 120 days following completion of all of the following reports— the National Money Laundering Risk Assessment; the National Terrorist Financing Risk Assessment; the National Proliferation Financing Risk Assessment; and the updated National Strategy for Combating Terrorist and Other Illicit Financing—the Secretary of the Treasury shall notify the relevant agencies through the interagency process described in section 3 of this order on any pending, proposed, or prospective rulemakings to address digital asset illicit finance risks. The Secretary of the Treasury shall consult with and consider the perspectives of relevant agencies in evaluating opportunities to mitigate such risks through regulation. Sec. 8. Policy and Actions Related to Fostering International Cooperation and United States Competitiveness. (a) The policy of my Administration on fostering international cooperation and United States competitiveness with respect to digital assets and financial innovation is as follows: (i) Technology-driven financial innovation is frequently cross-border and therefore requires international cooperation among public authorities. This cooperation is critical to maintaining high regulatory standards and a level playing field. Uneven regulation, supervision, and compliance across jurisdictions creates opportunities for arbitrage and raises risks to financial VerDate Sep<11>2014 15:38 Mar 11, 2022 Jkt 256001 PO 00000 Frm 00007 Fmt 4705 Sfmt 4790 E:\FR\FM\14MRE0.SGM 14MRE0 14150 Federal Register / Vol. 87, No. 49 / Monday, March 14, 2022 / Presidential Documents stability and the protection of consumers, investors, businesses, and markets. Inadequate AML/CFT regulation, supervision, and enforcement by other countries challenges the ability of the United States to investigate illicit digital asset transaction flows that frequently jump overseas, as is often the case in ransomware payments and other cybercrime-related money laundering. There must also be cooperation to reduce inefficiencies in international funds transfer and payment systems. (ii) The United States Government has been active in international fora and through bilateral partnerships on many of these issues and has a robust agenda to continue this work in the coming years. While the United States held the position of President of the FATF, the United States led the group in developing and adopting the first international standards on digital assets. The United States must continue to work with international partners on standards for the development and appropriate interoperability of digital payment architectures and CBDCs to reduce payment inefficiencies and ensure that any new funds transfer and payment systems are consistent with United States values and legal requirements. (iii) While the United States held the position of President of the 2020 G7, the United States established the G7 Digital Payments Experts Group to discuss CBDCs, stablecoins, and other digital payment issues. The G7 report outlining a set of policy principles for CBDCs is an important contribution to establishing guidelines for jurisdictions for the exploration and potential development of CBDCs. While a CBDC would be issued by a country’s central bank, the supporting infrastructure could involve both public and private participants. The G7 report highlighted that any CBDC should be grounded in the G7’s long-standing public commitments to transparency, the rule of law, and sound economic governance, as well as the promotion of competition and innovation. jspears on DSK121TN23PROD with PREZ DOC (iv) The United States continues to support the G20 roadmap for addressing challenges and frictions with cross-border funds transfers and payments for which work is underway, including work on improvements to existing systems for cross-border funds transfers and payments, the international dimensions of CBDC designs, and the potential of well-regulated stablecoin arrangements. The international Financial Stability Board (FSB), together with standard-setting bodies, is leading work on issues related to stablecoins, cross-border funds transfers and payments, and other international dimensions of digital assets and payments, while FATF continues its leadership in setting AML/CFT standards for digital assets. Such international work should continue to address the full spectrum of issues and challenges raised by digital assets, including financial stability, consumer, investor, and business risks, and money laundering, terrorist financing, proliferation financing, sanctions evasion, and other illicit activities. (v) My Administration will elevate the importance of these topics and expand engagement with our critical international partners, including through fora such as the G7, G20, FATF, and FSB. My Administration will support the ongoing international work and, where appropriate, push for additional work to drive development and implementation of holistic standards, cooperation and coordination, and information sharing. With respect to digital assets, my Administration will seek to ensure that our core democratic values are respected; consumers, investors, and businesses are protected; appropriate global financial system connectivity and platform and architecture interoperability are preserved; and the safety and soundness of the global financial system and international monetary system are maintained. (b) In furtherance of the policy stated in section 8(a) of this order: (i) Within 120 days of the date of this order, the Secretary of the Treasury, in consultation with the Secretary of State, the Secretary of Commerce, the Administrator of the United States Agency for International Development, and the heads of other relevant agencies, shall establish a framework for interagency international engagement with foreign counterparts and VerDate Sep<11>2014 15:38 Mar 11, 2022 Jkt 256001 PO 00000 Frm 00008 Fmt 4705 Sfmt 4790 E:\FR\FM\14MRE0.SGM 14MRE0 Federal Register / Vol. 87, No. 49 / Monday, March 14, 2022 / Presidential Documents 14151 in international fora to, as appropriate, adapt, update, and enhance adoption of global principles and standards for how digital assets are used and transacted, and to promote development of digital asset and CBDC technologies consistent with our values and legal requirements. This framework shall be coordinated through the interagency process described in section 3 of this order. This framework shall include specific and prioritized lines of effort and coordinated messaging; interagency engagement and activities with foreign partners, such as foreign assistance and capacity-building efforts and coordination of global compliance; and wholeof-government efforts to promote international principles, standards, and best practices. This framework should reflect ongoing leadership by the Secretary of the Treasury and financial regulators in relevant international financial standards bodies, and should elevate United States engagement on digital assets issues in technical standards bodies and other international fora to promote development of digital asset and CBDC technologies consistent with our values. (ii) Within 1 year of the date of the establishment of the framework required by section 8(b)(i) of this order, the Secretary of the Treasury, in consultation with the Secretary of State, the Secretary of Commerce, the Director of the Office of Management and Budget, the Administrator of the United States Agency for International Development, and the heads of other relevant agencies as appropriate, shall submit a report to the President on priority actions taken under the framework and its effectiveness. This report shall be coordinated through the interagency process described in section 3 of this order. (iii) Within 180 days of the date of this order, the Secretary of Commerce, in consultation with the Secretary of State, the Secretary of the Treasury, and the heads of other relevant agencies, shall establish a framework for enhancing United States economic competitiveness in, and leveraging of, digital asset technologies. This framework shall be coordinated through the interagency process described in section 3 of this order. (iv) Within 90 days of the date of this order, the Attorney General, in consultation with the Secretary of State, the Secretary of the Treasury, and the Secretary of Homeland Security, shall submit a report to the President on how to strengthen international law enforcement cooperation for detecting, investigating, and prosecuting criminal activity related to digital assets. Sec. 9. Definitions. For the purposes of this order: (a) The term ‘‘blockchain’’ refers to distributed ledger technologies where data is shared across a network that creates a digital ledger of verified transactions or information among network participants and the data are typically linked using cryptography to maintain the integrity of the ledger and execute other functions, including transfer of ownership or value. (b) The term ‘‘central bank digital currency’’ or ‘‘CBDC’’ refers to a form of digital money or monetary value, denominated in the national unit of account, that is a direct liability of the central bank. jspears on DSK121TN23PROD with PREZ DOC (c) The term ‘‘cryptocurrencies’’ refers to a digital asset, which may be a medium of exchange, for which generation or ownership records are supported through a distributed ledger technology that relies on cryptography, such as a blockchain. (d) The term ‘‘digital assets’’ refers to all CBDCs, regardless of the technology used, and to other representations of value, financial assets and instruments, or claims that are used to make payments or investments, or to transmit or exchange funds or the equivalent thereof, that are issued or represented in digital form through the use of distributed ledger technology. For example, digital assets include cryptocurrencies, stablecoins, and CBDCs. Regardless of the label used, a digital asset may be, among other things, a security, a commodity, a derivative, or other financial product. VerDate Sep<11>2014 15:38 Mar 11, 2022 Jkt 256001 PO 00000 Frm 00009 Fmt 4705 Sfmt 4790 E:\FR\FM\14MRE0.SGM 14MRE0 14152 Federal Register / Vol. 87, No. 49 / Monday, March 14, 2022 / Presidential Documents Digital assets may be exchanged across digital asset trading platforms, including centralized and decentralized finance platforms, or through peer-to-peer technologies. (e) The term ‘‘stablecoins’’ refers to a category of cryptocurrencies with mechanisms that are aimed at maintaining a stable value, such as by pegging the value of the coin to a specific currency, asset, or pool of assets or by algorithmically controlling supply in response to changes in demand in order to stabilize value. Sec. 10. General Provisions. (a) Nothing in this order shall be construed to impair or otherwise affect: (i) the authority granted by law to an executive department or agency, or the head thereof; or (ii) the functions of the Director of the Office of Management and Budget relating to budgetary, administrative, or legislative proposals. (b) This order shall be implemented consistent with applicable law and subject to the availability of appropriations. (c) This order is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person. THE WHITE HOUSE, March 9, 2022. [FR Doc. 2022–05471 Filed 3–11–22; 8:45 am] VerDate Sep<11>2014 15:38 Mar 11, 2022 Jkt 256001 PO 00000 Frm 00010 Fmt 4705 Sfmt 4790 E:\FR\FM\14MRE0.SGM 14MRE0 BIDEN.EPS</GPH> jspears on DSK121TN23PROD with PREZ DOC Billing code 3395–F2–P

Agencies

[Federal Register Volume 87, Number 49 (Monday, March 14, 2022)]
[Presidential Documents]
[Pages 14143-14152]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-05471]




                        Presidential Documents 



Federal Register / Vol. 87, No. 49 / Monday, March 14, 2022 / 
Presidential Documents

___________________________________________________________________

Title 3--
The President

[[Page 14143]]

                Executive Order 14067 of March 9, 2022

                
Ensuring Responsible Development of Digital 
                Assets

                By the authority vested in me as President by the 
                Constitution and the laws of the United States of 
                America, it is hereby ordered as follows:

                Section 1. Policy. Advances in digital and distributed 
                ledger technology for financial services have led to 
                dramatic growth in markets for digital assets, with 
                profound implications for the protection of consumers, 
                investors, and businesses, including data privacy and 
                security; financial stability and systemic risk; crime; 
                national security; the ability to exercise human 
                rights; financial inclusion and equity; and energy 
                demand and climate change. In November 2021, non-state 
                issued digital assets reached a combined market 
                capitalization of $3 trillion, up from approximately 
                $14 billion in early November 2016. Monetary 
                authorities globally are also exploring, and in some 
                cases introducing, central bank digital currencies 
                (CBDCs).

                While many activities involving digital assets are 
                within the scope of existing domestic laws and 
                regulations, an area where the United States has been a 
                global leader, growing development and adoption of 
                digital assets and related innovations, as well as 
                inconsistent controls to defend against certain key 
                risks, necessitate an evolution and alignment of the 
                United States Government approach to digital assets. 
                The United States has an interest in responsible 
                financial innovation, expanding access to safe and 
                affordable financial services, and reducing the cost of 
                domestic and cross-border funds transfers and payments, 
                including through the continued modernization of public 
                payment systems. We must take strong steps to reduce 
                the risks that digital assets could pose to consumers, 
                investors, and business protections; financial 
                stability and financial system integrity; combating and 
                preventing crime and illicit finance; national 
                security; the ability to exercise human rights; 
                financial inclusion and equity; and climate change and 
                pollution.

                Sec. 2. Objectives. The principal policy objectives of 
                the United States with respect to digital assets are as 
                follows:

                    (a) We must protect consumers, investors, and 
                businesses in the United States. The unique and varied 
                features of digital assets can pose significant 
                financial risks to consumers, investors, and businesses 
                if appropriate protections are not in place. In the 
                absence of sufficient oversight and standards, firms 
                providing digital asset services may provide inadequate 
                protections for sensitive financial data, custodial and 
                other arrangements relating to customer assets and 
                funds, or disclosures of risks associated with 
                investment. Cybersecurity and market failures at major 
                digital asset exchanges and trading platforms have 
                resulted in billions of dollars in losses. The United 
                States should ensure that safeguards are in place and 
                promote the responsible development of digital assets 
                to protect consumers, investors, and businesses; 
                maintain privacy; and shield against arbitrary or 
                unlawful surveillance, which can contribute to human 
                rights abuses.
                    (b) We must protect United States and global 
                financial stability and mitigate systemic risk. Some 
                digital asset trading platforms and service providers 
                have grown rapidly in size and complexity and may not 
                be subject to or in compliance with appropriate 
                regulations or supervision. Digital asset issuers, 
                exchanges and trading platforms, and intermediaries 
                whose activities may increase risks to financial 
                stability, should, as appropriate, be subject to and in 
                compliance with regulatory and supervisory standards 
                that govern traditional market infrastructures and 
                financial firms, in line with the general

[[Page 14144]]

                principle of ``same business, same risks, same rules.'' 
                The new and unique uses and functions that digital 
                assets can facilitate may create additional economic 
                and financial risks requiring an evolution to a 
                regulatory approach that adequately addresses those 
                risks.
                    (c) We must mitigate the illicit finance and 
                national security risks posed by misuse of digital 
                assets. Digital assets may pose significant illicit 
                finance risks, including money laundering, cybercrime 
                and ransomware, narcotics and human trafficking, and 
                terrorism and proliferation financing. Digital assets 
                may also be used as a tool to circumvent United States 
                and foreign financial sanctions regimes and other tools 
                and authorities. Further, while the United States has 
                been a leader in setting international standards for 
                the regulation and supervision of digital assets for 
                anti-money laundering and countering the financing of 
                terrorism (AML/CFT), poor or nonexistent implementation 
                of those standards in some jurisdictions abroad can 
                present significant illicit financing risks for the 
                United States and global financial systems. Illicit 
                actors, including the perpetrators of ransomware 
                incidents and other cybercrime, often launder and cash 
                out of their illicit proceeds using digital asset 
                service providers in jurisdictions that have not yet 
                effectively implemented the international standards set 
                by the inter-governmental Financial Action Task Force 
                (FATF). The continued availability of service providers 
                in jurisdictions where international AML/CFT standards 
                are not effectively implemented enables financial 
                activity without illicit finance controls. Growth in 
                decentralized financial ecosystems, peer-to-peer 
                payment activity, and obscured blockchain ledgers 
                without controls to mitigate illicit finance could also 
                present additional market and national security risks 
                in the future. The United States must ensure 
                appropriate controls and accountability for current and 
                future digital assets systems to promote high standards 
                for transparency, privacy, and security--including 
                through regulatory, governance, and technological 
                measures--that counter illicit activities and preserve 
                or enhance the efficacy of our national security tools. 
                When digital assets are abused or used in illicit ways, 
                or undermine national security, it is in the national 
                interest to take actions to mitigate these illicit 
                finance and national security risks through regulation, 
                oversight, law enforcement action, or use of other 
                United States Government authorities.
                    (d) We must reinforce United States leadership in 
                the global financial system and in technological and 
                economic competitiveness, including through the 
                responsible development of payment innovations and 
                digital assets. The United States has an interest in 
                ensuring that it remains at the forefront of 
                responsible development and design of digital assets 
                and the technology that underpins new forms of payments 
                and capital flows in the international financial 
                system, particularly in setting standards that promote: 
                democratic values; the rule of law; privacy; the 
                protection of consumers, investors, and businesses; and 
                interoperability with digital platforms, legacy 
                architecture, and international payment systems. The 
                United States derives significant economic and national 
                security benefits from the central role that the United 
                States dollar and United States financial institutions 
                and markets play in the global financial system. 
                Continued United States leadership in the global 
                financial system will sustain United States financial 
                power and promote United States economic interests.
                    (e) We must promote access to safe and affordable 
                financial services. Many Americans are underbanked and 
                the costs of cross-border money transfers and payments 
                are high. The United States has a strong interest in 
                promoting responsible innovation that expands equitable 
                access to financial services, particularly for those 
                Americans underserved by the traditional banking 
                system, including by making investments and domestic 
                and cross-border funds transfers and payments cheaper, 
                faster, and safer, and by promoting greater and more 
                cost-efficient access to financial products and 
                services. The United States also has an interest in 
                ensuring that the benefits of financial innovation are 
                enjoyed equitably by all Americans and that any 
                disparate impacts of financial innovation are 
                mitigated.

[[Page 14145]]

                    (f) We must support technological advances that 
                promote responsible development and use of digital 
                assets. The technological architecture of different 
                digital assets has substantial implications for 
                privacy, national security, the operational security 
                and resilience of financial systems, climate change, 
                the ability to exercise human rights, and other 
                national goals. The United States has an interest in 
                ensuring that digital asset technologies and the 
                digital payments ecosystem are developed, designed, and 
                implemented in a responsible manner that includes 
                privacy and security in their architecture, integrates 
                features and controls that defend against illicit 
                exploitation, and reduces negative climate impacts and 
                environmental pollution, as may result from some 
                cryptocurrency mining.

                Sec. 3. Coordination. The Assistant to the President 
                for National Security Affairs (APNSA) and the Assistant 
                to the President for Economic Policy (APEP) shall 
                coordinate, through the interagency process described 
                in National Security Memorandum 2 of February 4, 2021 
                (Renewing the National Security Council System), the 
                executive branch actions necessary to implement this 
                order. The interagency process shall include, as 
                appropriate: the Secretary of State, the Secretary of 
                the Treasury, the Secretary of Defense, the Attorney 
                General, the Secretary of Commerce, the Secretary of 
                Labor, the Secretary of Energy, the Secretary of 
                Homeland Security, the Administrator of the 
                Environmental Protection Agency, the Director of the 
                Office of Management and Budget, the Director of 
                National Intelligence, the Director of the Domestic 
                Policy Council, the Chair of the Council of Economic 
                Advisers, the Director of the Office of Science and 
                Technology Policy, the Administrator of the Office of 
                Information and Regulatory Affairs, the Director of the 
                National Science Foundation, and the Administrator of 
                the United States Agency for International Development. 
                Representatives of other executive departments and 
                agencies (agencies) and other senior officials may be 
                invited to attend interagency meetings as appropriate, 
                including, with due respect for their regulatory 
                independence, representatives of the Board of Governors 
                of the Federal Reserve System, the Consumer Financial 
                Protection Bureau (CFPB), the Federal Trade Commission 
                (FTC), the Securities and Exchange Commission (SEC), 
                the Commodity Futures Trading Commission (CFTC), the 
                Federal Deposit Insurance Corporation, the Office of 
                the Comptroller of the Currency, and other Federal 
                regulatory agencies.

                Sec. 4. Policy and Actions Related to United States 
                Central Bank Digital Currencies. (a) The policy of my 
                Administration on a United States CBDC is as follows:

(i) Sovereign money is at the core of a well-functioning financial system, 
macroeconomic stabilization policies, and economic growth. My 
Administration places the highest urgency on research and development 
efforts into the potential design and deployment options of a United States 
CBDC. These efforts should include assessments of possible benefits and 
risks for consumers, investors, and businesses; financial stability and 
systemic risk; payment systems; national security; the ability to exercise 
human rights; financial inclusion and equity; and the actions required to 
launch a United States CBDC if doing so is deemed to be in the national 
interest.

(ii) My Administration sees merit in showcasing United States leadership 
and participation in international fora related to CBDCs and in multi-
country conversations and pilot projects involving CBDCs. Any future dollar 
payment system should be designed in a way that is consistent with United 
States priorities (as outlined in section 4(a)(i) of this order) and 
democratic values, including privacy protections, and that ensures the 
global financial system has appropriate transparency, connectivity, and 
platform and architecture interoperability or transferability, as 
appropriate.

(iii) A United States CBDC may have the potential to support efficient and 
low-cost transactions, particularly for cross-border funds transfers and 
payments, and to foster greater access to the financial system, with fewer 
of the risks posed by private sector-administered digital assets. A United 
States CBDC that is interoperable with CBDCs issued by other monetary

[[Page 14146]]

authorities could facilitate faster and lower-cost cross-border payments 
and potentially boost economic growth, support the continued centrality of 
the United States within the international financial system, and help to 
protect the unique role that the dollar plays in global finance. There are 
also, however, potential risks and downsides to consider. We should 
prioritize timely assessments of potential benefits and risks under various 
designs to ensure that the United States remains a leader in the 
international financial system.

                    (b) Within 180 days of the date of this order, the 
                Secretary of the Treasury, in consultation with the 
                Secretary of State, the Attorney General, the Secretary 
                of Commerce, the Secretary of Homeland Security, the 
                Director of the Office of Management and Budget, the 
                Director of National Intelligence, and the heads of 
                other relevant agencies, shall submit to the President 
                a report on the future of money and payment systems, 
                including the conditions that drive broad adoption of 
                digital assets; the extent to which technological 
                innovation may influence these outcomes; and the 
                implications for the United States financial system, 
                the modernization of and changes to payment systems, 
                economic growth, financial inclusion, and national 
                security. This report shall be coordinated through the 
                interagency process described in section 3 of this 
                order. Based on the potential United States CBDC design 
                options, this report shall include an analysis of:

(i) the potential implications of a United States CBDC, based on the 
possible design choices, for national interests, including implications for 
economic growth and stability;

(ii) the potential implications a United States CBDC might have on 
financial inclusion;

(iii) the potential relationship between a CBDC and private sector-
administered digital assets;

(iv) the future of sovereign and privately produced money globally and 
implications for our financial system and democracy;

(v) the extent to which foreign CBDCs could displace existing currencies 
and alter the payment system in ways that could undermine United States 
financial centrality;

(vi) the potential implications for national security and financial crime, 
including an analysis of illicit financing risks, sanctions risks, other 
law enforcement and national security interests, and implications for human 
rights; and

(vii) an assessment of the effects that the growth of foreign CBDCs may 
have on United States interests generally.

                    (c) The Chairman of the Board of Governors of the 
                Federal Reserve System (Chairman of the Federal 
                Reserve) is encouraged to continue to research and 
                report on the extent to which CBDCs could improve the 
                efficiency and reduce the costs of existing and future 
                payments systems, to continue to assess the optimal 
                form of a United States CBDC, and to develop a 
                strategic plan for Federal Reserve and broader United 
                States Government action, as appropriate, that 
                evaluates the necessary steps and requirements for the 
                potential implementation and launch of a United States 
                CBDC. The Chairman of the Federal Reserve is also 
                encouraged to evaluate the extent to which a United 
                States CBDC, based on the potential design options, 
                could enhance or impede the ability of monetary policy 
                to function effectively as a critical macroeconomic 
                stabilization tool.
                    (d) The Attorney General, in consultation with the 
                Secretary of the Treasury and the Chairman of the 
                Federal Reserve, shall:

(i) within 180 days of the date of this order, provide to the President 
through the APNSA and APEP an assessment of whether legislative changes 
would be necessary to issue a United States CBDC, should it be deemed 
appropriate and in the national interest; and

[[Page 14147]]

(ii) within 210 days of the date of this order, provide to the President 
through the APNSA and the APEP a corresponding legislative proposal, based 
on consideration of the report submitted by the Secretary of the Treasury 
under section 4(b) of this order and any materials developed by the 
Chairman of the Federal Reserve consistent with section 4(c) of this order.

                Sec. 5. Measures to Protect Consumers, Investors, and 
                Businesses. (a) The increased use of digital assets and 
                digital asset exchanges and trading platforms may 
                increase the 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 faced by consumers, 
                investors, and businesses. The rise in use of digital 
                assets, and differences across communities, may also 
                present disparate financial risk to less informed 
                market participants or exacerbate inequities. It is 
                critical to ensure that digital assets do not pose 
                undue risks to consumers, investors, or businesses, and 
                to put in place protections as a part of efforts to 
                expand access to safe and affordable financial 
                services.

                    (b) Consistent with the goals stated in section 
                5(a) of this order:

(i) Within 180 days of the date of this order, the Secretary of the 
Treasury, in consultation with the Secretary of Labor and the heads of 
other relevant agencies, including, as appropriate, the heads of 
independent regulatory agencies such as the FTC, the SEC, the CFTC, Federal 
banking agencies, and the CFPB, shall submit to the President a report, or 
section of the report required by section 4 of this order, on the 
implications of developments and adoption of digital assets and changes in 
financial market and payment system infrastructures for United States 
consumers, investors, businesses, and for equitable economic growth. One 
section of the report shall address the conditions that would drive mass 
adoption of different types of digital assets and the risks and 
opportunities such growth might present to United States consumers, 
investors, and businesses, including a focus on how technological 
innovation may impact these efforts and with an eye toward those most 
vulnerable to disparate impacts. The report shall also include policy 
recommendations, including potential regulatory and legislative actions, as 
appropriate, to protect United States consumers, investors, and businesses, 
and support expanding access to safe and affordable financial services. The 
report shall be coordinated through the interagency process described in 
section 3 of this order.

(ii) Within 180 days of the date of this order, the Director of the Office 
of Science and Technology Policy and the Chief Technology Officer of the 
United States, in consultation with the Secretary of the Treasury, the 
Chairman of the Federal Reserve, and the heads of other relevant agencies, 
shall submit to the President a technical evaluation of the technological 
infrastructure, capacity, and expertise that would be necessary at relevant 
agencies to facilitate and support the introduction of a CBDC system should 
one be proposed. The evaluation should specifically address the technical 
risks of the various designs, including with respect to emerging and future 
technological developments, such as quantum computing. The evaluation 
should also include any reflections or recommendations on how the inclusion 
of digital assets in Federal processes may affect the work of the United 
States Government and the provision of Government services, including risks 
and benefits to cybersecurity, customer experience, and social-safety-net 
programs. The evaluation shall be coordinated through the interagency 
process described in section 3 of this order.

(iii) Within 180 days of the date of this order, the Attorney General, in 
consultation with the Secretary of the Treasury and the Secretary of 
Homeland Security, shall submit to the President a report on the role of 
law enforcement agencies in detecting, investigating, and prosecuting 
criminal activity related to digital assets. The report shall include any 
recommendations on regulatory or legislative actions, as appropriate.

[[Page 14148]]

(iv) The Attorney General, the Chair of the FTC, and the Director of the 
CFPB are each encouraged to consider what, if any, effects the growth of 
digital assets could have on competition policy.

(v) The Chair of the FTC and the Director of the CFPB are each encouraged 
to consider the extent to which privacy or consumer protection measures 
within their respective jurisdictions may be used to protect users of 
digital assets and whether additional measures may be needed.

(vi) The Chair of the SEC, the Chairman of the CFTC, the Chairman of the 
Federal Reserve, the Chairperson of the Board of Directors of the Federal 
Deposit Insurance Corporation, and the Comptroller of the Currency are each 
encouraged to consider the extent to which investor and market protection 
measures within their respective jurisdictions may be used to address the 
risks of digital assets and whether additional measures may be needed.

(vii) Within 180 days of the date of this order, the Director of the Office 
of Science and Technology Policy, in consultation with the Secretary of the 
Treasury, the Secretary of Energy, the Administrator of the Environmental 
Protection Agency, the Chair of the Council of Economic Advisers, the 
Assistant to the President and National Climate Advisor, and the heads of 
other relevant agencies, shall submit a report to the President on the 
connections between distributed ledger technology and short-, medium-, and 
long-term economic and energy transitions; the potential for these 
technologies to impede or advance efforts to tackle climate change at home 
and abroad; and the impacts these technologies have on the environment. 
This report shall be coordinated through the interagency process described 
in section 3 of this order. The report should also address the effect of 
cryptocurrencies' consensus mechanisms on energy usage, including research 
into potential mitigating measures and alternative mechanisms of consensus 
and the design tradeoffs those may entail. The report should specifically 
address:

  (A) potential uses of blockchain that could support monitoring or 
mitigating technologies to climate impacts, such as exchanging of 
liabilities for greenhouse gas emissions, water, and other natural or 
environmental assets; and

  (B) implications for energy policy, including as it relates to grid 
management and reliability, energy efficiency incentives and standards, and 
sources of energy supply.

(viii) Within 1 year of submission of the report described in section 
5(b)(vii) of this order, the Director of the Office of Science and 
Technology Policy, in consultation with the Secretary of the Treasury, the 
Secretary of Energy, the Administrator of the Environmental Protection 
Agency, the Chair of the Council of Economic Advisers, and the heads of 
other relevant agencies, shall update the report described in section 
5(b)(vii) of this order, including to address any knowledge gaps identified 
in such report.

                Sec. 6. Actions to Promote Financial Stability, 
                Mitigate Systemic Risk, and Strengthen Market 
                Integrity. (a) Financial regulators--including the SEC, 
                the CFTC, and the CFPB and Federal banking agencies--
                play critical roles in establishing and overseeing 
                protections across the financial system that safeguard 
                its integrity and promote its stability. Since 2017, 
                the Secretary of the Treasury has convened the 
                Financial Stability Oversight Council (FSOC) to assess 
                the financial stability risks and regulatory gaps posed 
                by the ongoing adoption of digital assets. The United 
                States must assess and take steps to address risks that 
                digital assets pose to financial stability and 
                financial market integrity.

                    (b) Within 210 days of the date of this order, the 
                Secretary of the Treasury should convene the FSOC and 
                produce a report outlining the specific financial 
                stability risks and regulatory gaps posed by various 
                types of digital assets and providing recommendations 
                to address such risks. As the Secretary

[[Page 14149]]

                of the Treasury and the FSOC deem appropriate, the 
                report should consider the particular features of 
                various types of digital assets and include 
                recommendations that address the identified financial 
                stability risks posed by these digital assets, 
                including any proposals for additional or adjusted 
                regulation and supervision as well as for new 
                legislation. The report should take account of the 
                prior analyses and assessments of the FSOC, agencies, 
                and the President's Working Group on Financial Markets, 
                including the ongoing work of the Federal banking 
                agencies, as appropriate.

                Sec. 7. Actions to Limit Illicit Finance and Associated 
                National Security Risks. (a) Digital assets have 
                facilitated sophisticated cybercrime-related financial 
                networks and activity, including through ransomware 
                activity. The growing use of digital assets in 
                financial activity heightens risks of crimes such as 
                money laundering, terrorist and proliferation 
                financing, fraud and theft schemes, and corruption. 
                These illicit activities highlight the need for ongoing 
                scrutiny of the use of digital assets, the extent to 
                which technological innovation may impact such 
                activities, and exploration of opportunities to 
                mitigate these risks through regulation, supervision, 
                public-private engagement, oversight, and law 
                enforcement.

                    (b) Within 90 days of submission to the Congress of 
                the National Strategy for Combating Terrorist and Other 
                Illicit Financing, the Secretary of the Treasury, the 
                Secretary of State, the Attorney General, the Secretary 
                of Commerce, the Secretary of Homeland Security, the 
                Director of the Office of Management and Budget, the 
                Director of National Intelligence, and the heads of 
                other relevant agencies may each submit to the 
                President supplemental annexes, which may be classified 
                or unclassified, to the Strategy offering additional 
                views on illicit finance risks posed by digital assets, 
                including cryptocurrencies, stablecoins, CBDCs, and 
                trends in the use of digital assets by illicit actors.
                    (c) Within 120 days of submission to the Congress 
                of the National Strategy for Combating Terrorist and 
                Other Illicit Financing, the Secretary of the Treasury, 
                in consultation with the Secretary of State, the 
                Attorney General, the Secretary of Commerce, the 
                Secretary of Homeland Security, the Director of the 
                Office of Management and Budget, the Director of 
                National Intelligence, and the heads of other relevant 
                agencies shall develop a coordinated action plan based 
                on the Strategy's conclusions for mitigating the 
                digital-asset-related illicit finance and national 
                security risks addressed in the updated strategy. This 
                action plan shall be coordinated through the 
                interagency process described in section 3 of this 
                order. The action plan shall address the role of law 
                enforcement and measures to increase financial services 
                providers' compliance with AML/CFT obligations related 
                to digital asset activities.
                    (d) Within 120 days following completion of all of 
                the following reports--the National Money Laundering 
                Risk Assessment; the National Terrorist Financing Risk 
                Assessment; the National Proliferation Financing Risk 
                Assessment; and the updated National Strategy for 
                Combating Terrorist and Other Illicit Financing--the 
                Secretary of the Treasury shall notify the relevant 
                agencies through the interagency process described in 
                section 3 of this order on any pending, proposed, or 
                prospective rulemakings to address digital asset 
                illicit finance risks. The Secretary of the Treasury 
                shall consult with and consider the perspectives of 
                relevant agencies in evaluating opportunities to 
                mitigate such risks through regulation.

                Sec. 8. Policy and Actions Related to Fostering 
                International Cooperation and United States 
                Competitiveness. (a) The policy of my Administration on 
                fostering international cooperation and United States 
                competitiveness with respect to digital assets and 
                financial innovation is as follows:

(i) Technology-driven financial innovation is frequently cross-border and 
therefore requires international cooperation among public authorities. This 
cooperation is critical to maintaining high regulatory standards and a 
level playing field. Uneven regulation, supervision, and compliance across 
jurisdictions creates opportunities for arbitrage and raises risks to 
financial

[[Page 14150]]

stability and the protection of consumers, investors, businesses, and 
markets. Inadequate AML/CFT regulation, supervision, and enforcement by 
other countries challenges the ability of the United States to investigate 
illicit digital asset transaction flows that frequently jump overseas, as 
is often the case in ransomware payments and other cybercrime-related money 
laundering. There must also be cooperation to reduce inefficiencies in 
international funds transfer and payment systems.

(ii) The United States Government has been active in international fora and 
through bilateral partnerships on many of these issues and has a robust 
agenda to continue this work in the coming years. While the United States 
held the position of President of the FATF, the United States led the group 
in developing and adopting the first international standards on digital 
assets. The United States must continue to work with international partners 
on standards for the development and appropriate interoperability of 
digital payment architectures and CBDCs to reduce payment inefficiencies 
and ensure that any new funds transfer and payment systems are consistent 
with United States values and legal requirements.

(iii) While the United States held the position of President of the 2020 
G7, the United States established the G7 Digital Payments Experts Group to 
discuss CBDCs, stablecoins, and other digital payment issues. The G7 report 
outlining a set of policy principles for CBDCs is an important contribution 
to establishing guidelines for jurisdictions for the exploration and 
potential development of CBDCs. While a CBDC would be issued by a country's 
central bank, the supporting infrastructure could involve both public and 
private participants. The G7 report highlighted that any CBDC should be 
grounded in the G7's long-standing public commitments to transparency, the 
rule of law, and sound economic governance, as well as the promotion of 
competition and innovation.

(iv) The United States continues to support the G20 roadmap for addressing 
challenges and frictions with cross-border funds transfers and payments for 
which work is underway, including work on improvements to existing systems 
for cross-border funds transfers and payments, the international dimensions 
of CBDC designs, and the potential of well-regulated stablecoin 
arrangements. The international Financial Stability Board (FSB), together 
with standard-setting bodies, is leading work on issues related to 
stablecoins, cross-border funds transfers and payments, and other 
international dimensions of digital assets and payments, while FATF 
continues its leadership in setting AML/CFT standards for digital assets. 
Such international work should continue to address the full spectrum of 
issues and challenges raised by digital assets, including financial 
stability, consumer, investor, and business risks, and money laundering, 
terrorist financing, proliferation financing, sanctions evasion, and other 
illicit activities.

(v) My Administration will elevate the importance of these topics and 
expand engagement with our critical international partners, including 
through fora such as the G7, G20, FATF, and FSB. My Administration will 
support the ongoing international work and, where appropriate, push for 
additional work to drive development and implementation of holistic 
standards, cooperation and coordination, and information sharing. With 
respect to digital assets, my Administration will seek to ensure that our 
core democratic values are respected; consumers, investors, and businesses 
are protected; appropriate global financial system connectivity and 
platform and architecture interoperability are preserved; and the safety 
and soundness of the global financial system and international monetary 
system are maintained.

                    (b) In furtherance of the policy stated in section 
                8(a) of this order:

(i) Within 120 days of the date of this order, the Secretary of the 
Treasury, in consultation with the Secretary of State, the Secretary of 
Commerce, the Administrator of the United States Agency for International 
Development, and the heads of other relevant agencies, shall establish a 
framework for interagency international engagement with foreign 
counterparts and

[[Page 14151]]

in international fora to, as appropriate, adapt, update, and enhance 
adoption of global principles and standards for how digital assets are used 
and transacted, and to promote development of digital asset and CBDC 
technologies consistent with our values and legal requirements. This 
framework shall be coordinated through the interagency process described in 
section 3 of this order. This framework shall include specific and 
prioritized lines of effort and coordinated messaging; interagency 
engagement and activities with foreign partners, such as foreign assistance 
and capacity-building efforts and coordination of global compliance; and 
whole-of-government efforts to promote international principles, standards, 
and best practices. This framework should reflect ongoing leadership by the 
Secretary of the Treasury and financial regulators in relevant 
international financial standards bodies, and should elevate United States 
engagement on digital assets issues in technical standards bodies and other 
international fora to promote development of digital asset and CBDC 
technologies consistent with our values.

(ii) Within 1 year of the date of the establishment of the framework 
required by section 8(b)(i) of this order, the Secretary of the Treasury, 
in consultation with the Secretary of State, the Secretary of Commerce, the 
Director of the Office of Management and Budget, the Administrator of the 
United States Agency for International Development, and the heads of other 
relevant agencies as appropriate, shall submit a report to the President on 
priority actions taken under the framework and its effectiveness. This 
report shall be coordinated through the interagency process described in 
section 3 of this order.

(iii) Within 180 days of the date of this order, the Secretary of Commerce, 
in consultation with the Secretary of State, the Secretary of the Treasury, 
and the heads of other relevant agencies, shall establish a framework for 
enhancing United States economic competitiveness in, and leveraging of, 
digital asset technologies. This framework shall be coordinated through the 
interagency process described in section 3 of this order.

(iv) Within 90 days of the date of this order, the Attorney General, in 
consultation with the Secretary of State, the Secretary of the Treasury, 
and the Secretary of Homeland Security, shall submit a report to the 
President on how to strengthen international law enforcement cooperation 
for detecting, investigating, and prosecuting criminal activity related to 
digital assets.

                Sec. 9. Definitions. For the purposes of this order:

                    (a) The term ``blockchain'' refers to distributed 
                ledger technologies where data is shared across a 
                network that creates a digital ledger of verified 
                transactions or information among network participants 
                and the data are typically linked using cryptography to 
                maintain the integrity of the ledger and execute other 
                functions, including transfer of ownership or value.
                    (b) The term ``central bank digital currency'' or 
                ``CBDC'' refers to a form of digital money or monetary 
                value, denominated in the national unit of account, 
                that is a direct liability of the central bank.
                    (c) The term ``cryptocurrencies'' refers to a 
                digital asset, which may be a medium of exchange, for 
                which generation or ownership records are supported 
                through a distributed ledger technology that relies on 
                cryptography, such as a blockchain.
                    (d) The term ``digital assets'' refers to all 
                CBDCs, regardless of the technology used, and to other 
                representations of value, financial assets and 
                instruments, or claims that are used to make payments 
                or investments, or to transmit or exchange funds or the 
                equivalent thereof, that are issued or represented in 
                digital form through the use of distributed ledger 
                technology. For example, digital assets include 
                cryptocurrencies, stablecoins, and CBDCs. Regardless of 
                the label used, a digital asset may be, among other 
                things, a security, a commodity, a derivative, or other 
                financial product.

[[Page 14152]]

                Digital assets may be exchanged across digital asset 
                trading platforms, including centralized and 
                decentralized finance platforms, or through peer-to-
                peer technologies.
                    (e) The term ``stablecoins'' refers to a category 
                of cryptocurrencies with mechanisms that are aimed at 
                maintaining a stable value, such as by pegging the 
                value of the coin to a specific currency, asset, or 
                pool of assets or by algorithmically controlling supply 
                in response to changes in demand in order to stabilize 
                value.

                Sec. 10. General Provisions. (a) Nothing in this order 
                shall be construed to impair or otherwise affect:

(i) the authority granted by law to an executive department or agency, or 
the head thereof; or

(ii) the functions of the Director of the Office of Management and Budget 
relating to budgetary, administrative, or legislative proposals.

                    (b) This order shall be implemented consistent with 
                applicable law and subject to the availability of 
                appropriations.
                    (c) This order is not intended to, and does not, 
                create any right or benefit, substantive or procedural, 
                enforceable at law or in equity by any party against 
                the United States, its departments, agencies, or 
                entities, its officers, employees, or agents, or any 
                other person.
                
                
                    (Presidential Sig.)

                THE WHITE HOUSE,

                    March 9, 2022.

[FR Doc. 2022-05471
Filed 3-11-22; 8:45 am]
Billing code 3395-F2-P