Regulation and public policy for digital assets are in flux in the United States and globally. Bitcoin and other digital assets are newer than the core laws and regulatory principles that govern the financial system, so these assets do not fit easily within existing frameworks.
This paper provides a high-level guide to some of the key issues overall, which apply across the globe, and, as an illustration, discusses the likely outcomes for the US.
This is particularly timely given President Biden’s recent Executive Order calling for a “whole of government” approach to digital assets, with specific actions to be proposed by a series of reports over the course of this year. There are a series of major conceptual questions that must be answered to achieve coherent regulatory policy in this area:
• Should digital assets be encouraged, discouraged, or channeled in some way?
• Are new laws and a new regulator needed for digital assets?
• If yes, what would qualify as a digital asset for this purpose?
• If no, how are digital assets divided among existing regulators?
• How should overlaps of digital asset categories be handled?
• How should central bank digital currencies fit in?
• How should decentralized finance be regulated?
• How can existing legislative authority be used by regulators?
• What is the role of enforcement actions versus enhanced regulation?
• Is there a need for new legislation? Is it achievable?
• Are digital assets systemically important?
Several important implementation issues arise once these conceptual questions are answered, including:
• How should licensing/chartering work?
• What capital and liquidity rules are needed?
• How can adequate global coordination be achieved?
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