Capital markets News

Digital assets: How US Treasury plans to tackle regulatory arbitrage

us treasury

Yesterday the U.S. Treasury published an interagency framework to engage internationally about digital assets in response to President Biden’s Executive Order on the topic. Hence to tackle regulatory arbitrage, it plans for multiple U.S. agencies to actively participate with global bodies that are setting principles for dealing with digital assets. This includes cryptocurrencies, stablecoins and central bank digital currencies (CBDCs).

While the framework isn’t entirely about regulation, the first three motivations include protecting consumers, preserving financial stability and mitigating illicit finance. A key challenge is the border free nature of digital assets, which encourages international regulatory arbitrage. However, it is keen to support innovation.

Beyond that, the aim is to ‘Reinforce U.S. leadership in the global financial system’. The Treasury is keen for U.S. companies to lead in developing central bank digital currency (CBDC) infrastructure.

The same six policy objectives were outlined in President Biden’s executive order and an April speech by Treasury Secretary Janet Yellen. During that talk, she emphasized that regulation will target risks and activities, rather than specific technologies.

Much of the framework’s strategy involves creating common international principles and standards, such as those established by the G7 for retail CBDCs. Hence the U.S. will continue to collaborate internationally with the various bodies exploring the topics, such as the G7, G20Financial Stability Board, FATF, OECD, IMF, World Bank, BIS, standard setters and other organizations.

The Departments of State, Commerce, and other agencies participated in formulating the framework.

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