How to interpret: US President Biden signs first executive order on digital assets

On the 9th, the White House website published a statement titled: "Fact Sheet: President Biden to Sign Executive Order on Ensuring Responsible Innovation in Digital Assets" [1], which "outlines the first-ever whole-of-government strategy for protecting consumers, financial stability, national security, and addressing climate risks."

An interesting point is that although my country proposed a similar initiative earlier, our initiative focused on the underlying technology, the so-called "blockchain", and ignored the only and important application of the technology so far: digital assets. The US framework does not mention the so-called "blockchain" at all, but focuses on the upper-level application, that is, digital assets.

Obviously, in the framework proposed by the US government, digital assets cover crypto assets based on the so-called blockchain technology, as well as other digital assets that are not based on blockchain, such as the central bank digital currency CBDC.

Therefore, the term used in Biden’s presidential order is “Digital Assets and its underlying technologies” rather than “Blockchain and its applications”.

To give an analogy, digital assets are like screws, non-blockchain technology is like a screwdriver, and blockchain is like a hammer.

Our country’s proposal is: We should study how to use a hammer carefully, but the only thing we are not allowed to do is to use it to drive in screws.

The US proposal is: study how to screw in screws, whether to screw them in with a screwdriver or hammer them in, we are not opposed to it. In the past, we used screwdrivers to screw them in, but now some people say that hammering them in directly is also good, which is faster and less labor-intensive. We need to study this carefully to maintain our technological leadership. Of course, we must pay attention to safety during this process and avoid hitting our fingers.

In terms of concept, digital assets cover both blockchain assets and non-blockchain assets, and blockchain assets (crypto assets) cover cryptocurrencies, NFTs (digital collectibles, digital artworks), etc. However, the significance of this presidential order is to focus on blockchain assets and cover some pseudo-blockchain assets such as CBDC. In other words, the US government is still concerned about new ways to hammer screws.

The statement pointed out that President Biden will sign an executive order on the same day, outlining the first-ever government-wide plan to leverage the potential benefits of digital assets and their underlying technologies and address their risks. The national policy on digital assets outlined in the order covers six key priorities: 1. Consumer and investor protection; 2. Financial stability; 3. Illegal financing; 4. U.S. leadership in the global financial system and economic competitiveness; 5. Financial inclusion; 6. Responsible innovation.

Specifically:

First, it protects American consumers, investors, and businesses by directing the Treasury Department and other agency partners to evaluate and develop policy recommendations to address the impact of the growing digital asset industry and changes in financial markets on consumers, investors, businesses, and fair economic growth. The order also encourages regulators to ensure adequate oversight and prevent any systemic financial risks posed by digital assets.

The Treasury Department is the leader, and the current chair is Yellen. What is Ms. Yellen's attitude towards Bitcoin and other digital assets? You can read the article "What does US Treasury Secretary Candidate Yellen say about Bitcoin" written by Liu Jiaolian's official account on January 24, 2021. When Yellen took office as Treasury Secretary, she bluntly used some negative evaluation words at the hearing, which directly caused Bitcoin to collapse, from a low of 41k to 28.8k.

Second, protect U.S. and global financial stability and reduce systemic risk by encouraging the Financial Stability Oversight Council to identify and mitigate economy-wide (i.e., systemic) financial risks posed by digital assets and develop appropriate policy recommendations to address any regulatory gaps.

Third, it directs all relevant U.S. government agencies to take unprecedented coordinated actions to mitigate the illicit financial and national security risks posed by the illicit use of digital assets. It also directs agencies to work with our allies and partners to ensure that international frameworks, capabilities, and partnerships are aligned and address risks.

Articles 2 and 3 are very clear, they are to strengthen supervision and deal with risks, especially in the areas of illegal finance and national security.

It is not clear whether the United States will introduce management measures for cryptocurrency fundraising, ICO, IEO and other types of IXO. For example, the judicial interpretation just issued by my country has included it in the scope of crackdown on illegal fundraising crimes in the criminal law.

Judging from the previous SEC’s regulatory enforcement cases, this possibility is only high. Before the executive order was issued, the SEC had already taken the initiative to arrest and crack down on several ICO projects.

Fourth, strengthen the United States’ leadership in the global financial system by directing the Department of Commerce to work with the U.S. government to establish a framework to advance U.S. competitiveness and leadership in digital asset technology and to leverage digital asset technology to promote U.S. leadership in technology and economic competitiveness. This framework will serve as a foundation for agencies to incorporate as a priority into their policies, R&D, and operational approaches to digital assets.

The issue of technological leadership was mentioned. Note that the term used is "digital asset technologies" rather than "blockchain technology."

Fifth, promote equitable access to safe and affordable financial services by recognizing that the urgent need for safe, affordable, and accessible financial services is in the U.S. national interest, which must inform our approach to digital asset innovation, including differential impact risks. This safe access is particularly important for communities that have historically been underserved. The Secretary of the Treasury will work with all relevant agencies to prepare a report on the future of money and payments systems, including implications for economic growth, financial growth and inclusion, national security, and the extent to which technological innovations may impact the future.

The Ministry of Finance should study carefully how to use this to promote inclusive finance, so that every household can have a better way to nail things.

Sixth, support technological advancement and ensure the responsible development and use of digital assets, instructing the U.S. government to take concrete steps to research and support technological advancement for the responsible development, design and implementation of digital asset systems, while prioritizing privacy, security, combating illicit exploitation, and reducing negative climate impacts.

Fight financial crimes and tax evasion. Another issue is PoW mining. Electricity consumption is not a problem, but climate impact is. This is a slightly different perspective. If electricity consumption does not harm the environment (such as green energy) or is even beneficial (such as reducing abandoned electricity), then the amount of electricity consumption is not a problem. This is a more scientific way to define the issue of mining power consumption.

Seventh, explore a U.S. central bank digital currency (CBDC) through urgent research and development of a potential U.S. CBDC if it is deemed in the national interest. The order directs the U.S. government to assess the technical infrastructure and capacity requirements of a potential U.S. CBDC in a manner that protects the interests of Americans. The order also encourages the Federal Reserve to continue its research, development, and evaluation work on the U.S. CBDC, including developing a plan to support broader U.S. government action. This work prioritizes U.S. participation in multinational trials and ensures U.S. leadership internationally to promote the development of CBDCs that are consistent with U.S. priorities and democratic values.

There has been a long-standing rumor about whether the United States should develop a CBDC. Now it is clear that it will explore it.

However, the presidential order rumored on social media instructing the US government to study the inclusion of Bitcoin as legal currency is also far from the truth.

In general, the attitude is positive. However, the extent of the benefits to the market is limited to just a pie in the sky.

Bitcoin reacted positively, rising from 38k to 42k. Currently, it has slightly corrected and is below 42k.