Digital assets are being discussed a lot in the U.S. policymaking institutions, lately. The Chairman of the Board of Governors of the Federal Reserve System, Jerome Powell, has nullified intentions of banning cryptocurrencies. In a House Financial Services Committee hearing, Jerome Powell discussed cryptocurrency, stablecoins, and central bank digital currencies (CBDCs).
The U.S. lawmakers are finally acknowledging the reality that digital assets are here to stay—for good. Having prepared a “Digital Assets Primer: Only the first inning,” the Bank of America (BoA) Global Research reports that “digital assets are too large to ignore.” BoA states that “digital assets are creating a whole ecosystem of new companies, new opportunities, and new applications.” The BoA’s primer report is meant to prepare an “investment framework for the digital asset landscape.” It will assess various aspects of digital assets, as follows:
- Tokens acting as operating systems
- Smart contracts-powered applications
- Fiat-pegged stablecoins
- CBDCs replacing fiat money
- NFTs connecting creators and fans uniquely
BoA’s Global Cryptocurrency and Digital Asset Strategy Head, Alkesh Shah opines:
Bitcoin is important but the digital asset ecosystem is so much more. Our research aims to explore the implications across industries including finance, technology, supply chains, social media and gaming.
Meanwhile, U.S. lawmakers have sent a bipartisan letter to Powell requesting support for cryptocurrency innovation. The said letter is signed by Reps. Tom Emmer, Darren Soto, Frank Lucas, Ted Budd, Ro Khanna, Glenn “GT” Thompson, and Eric Swalwell.
Rep. Emmer noted:
Empowering individual Americans to become everyday investors should be our highest priority – decentralized digital assets provide that opportunity. The Federal Reserve must work to support domestic innovation … Our government should never be in the business of thwarting innovation.
The letter in question stresses on cryptocurrency acceptance being “hobbled by a lack of regulator clarity.” Fed Chair Powell was asked to give clarity on the initiatives the Fed. Res. plans:
on its own or in coordination with regional Federal Reserve Banks to provide regulatory clarity to banks that wish to offer cryptocurrency or other digital asset custody to their customers.
To curb “the illicit use of cryptocurrency,” the United States’ White House had President Joe Biden announce the U.S. is “partnering closely with nations around the world” to tackle cybersecurity fragility. These potential partners would also include “NATO allies and G7 partners.”
President Biden says:
The United States will bring together 30 countries to accelerate our cooperation in combating cybercrime, improving law enforcement collaboration, stemming the illicit use of cryptocurrency, and engaging on these issues diplomatically.
Russia (10% of all cases) and the United States (5.3% of all cases) rank in the top 3 economies highly vulnerable to cryptocurrency threats, per ESET Threat Intelligence report (2021). Although, the Biden administration’s commitment to enhancing critical infrastructure to fight cyberattacks is already quite apparent.
The International Monetary Fund (IMF) has recently warned against the mounting popularity of cryptocurrencies, potentially hurting financial stability. The IMF, while warning of unregulated cryptocurrencies, states:
Cryptoization can reduce the ability of central banks to effectively implement monetary policy. It could also create financial stability risks.
The blog post, penned by IMF’s Monetary and Capital Markets Department experts, Dimitris Drakopoulos, Fabio Natalucci, and Evan Papageorgiou, is titled, “Crypto boom poses new challenges to financial stability.”
The blog post points out:
Consumer protection risks remain substantial given limited or inadequate disclosure and oversight.
In September 2021, all the crypto assets’ collective market value crossed US$2 trillion—rising ten-fold from 2020. The IMF flags a lack of “strong operational, governance, and risk practices” in the cryptoverse.
The U.S. Deputy Attorney General Lisa Monaco says a National Cryptocurrency Enforcement Team (NCET) is launching soon. The NCET will prosecute ‘Criminal Misuses of Cryptocurrency.’ The NCET would also work “to tackle complex investigations and prosecutions of criminal misuses of cryptocurrency, particularly crimes committed by virtual currency exchanges, mixing and tumbling services, and money laundering infrastructure actors.”
“The team will also assist in tracing and recovery of assets lost to fraud and extortion, including cryptocurrency payments to ransomware groups,” states Lisa Monaco. The NCET would “strengthen” the Department of Justice’s (DOJ) capacity to thwart financial markets that promote cybercrime.
