Federal Agency Reports in Response to Executive Order 14067

On September 16, 2022, the White House (WH) outlined federal agency recommendations in response to the March 9, 2022, Executive Order 14067 (EO), Ensuring Responsible Development of Digital Assets. The EO commissioned federal leadership and agencies to issue reports and recommendations to advance the EO’s six key priorities. The following outlines key aspects of those recommendations:

Step up Civil Regulatory Enforcement and Consumer Protection

Direct US civil enforcement agencies (e.g., Securities and Exchange Commission, Commodity Futures Trading Commission) to aggressively enforce unlawful practices, to stringently monitor consumer complaints, and to lead public awareness campaigns on consumer risks and fraudulent practices. 

Systemic Risk Mitigation

Subject cryptocurrency platforms, as appropriate, to regulatory and supervisory standards that govern traditional market infrastructures and financial firms, to maintain global financial stability, and mitigate systemic and cyber risk.

Decentralized Finance (DeFi) and Non-Fungible Tokens (NFT) potentially in the Crosshairs

Evaluate whether the president will call upon Congress to amend the laws and increase penalties against unlicensed money transmitting to apply explicitly to digital asset service providers, including digital asset exchanges and NFT platforms. Additionally, Treasury will complete an illicit finance risk assessment on DeFi by the end of February 2023, and an assessment on NFTs by July 2023.

Make Sure the US Dollar and Financial System Stay No. 1

Reinforce US leadership in the global financial system to ensure that the US maintains significant economic and national security benefits that it possesses from the central role that the US dollar and US financial institutions and markets play in the global financial system. This will be accomplished by:

1. Expanding roles in international organizations like the Financial Action Task Force.
2. Collaborating with foreign countries. 
3. Helping to build out infrastructure of developing countries.
4. Assisting US firms in gaining access to global markets.

Expand Access to Faster Payments and Potential Federal Framework for Non-Bank Payment Providers

Expand access to financial services, particularly for those Americans underserved by the traditional banking system, including making investments and domestic and cross-border funds transfers that make payments cheaper, faster, and safer, and by promoting greater and more cost-efficient access to financial products and services. Key points include:

• 2023 Launch of FedNow, the US’ instantaneous, 24/7 interbank clearing system.
• Considering agency recommendation to create a federal framework to regulate nonbank payment providers.

Support Responsible Development and Use

Developing, designing, and implementing digital assets in a responsible manner that includes privacy and security in their architecture, integrating features and controls that defend against illicit exploitation, and reducing negative climate impacts and environmental pollution.

US is Still Evaluating a Central Bank Digital Currency (CBDC)

The WH acknowledged that a US CBDC has the potential to offer significant benefits. However, the WH also indicated that further research and development on the technology was needed. As such, Treasury will lead an interagency working group to consider the potential implications of a US CBDC, leverage cross-government technical expertise, and share information with partners.

What Does This Mean for Guidehouse?

Guidehouse can help digital assets exchanges, cryptocurrency, and NFT assess their compliance programs to navigate these regulatory risks, including developing and implementing updates to operations, policies, procedures, controls, and technology.

Clients can engage Guidehouse to provide:

• Anti-Money Laundering (AML) and Office of Foreign Assets Control (OFAC) Advisory
• AML and OFAC program management outsourcing
• Consumer compliance
• Cybersecurity
• Blockchain analytics
• Strategic planning
• Risk management
• Vendor sourcing and governance
• Executive training

Guidehouse is well-equipped to make an individualized assessment of a clients’ unique circumstances and offer innovative advice and solutions for responding to heightened regulatory requirements.