On July 8, 2022, the US Department of the Treasury issued a request for public comment on the responsible development and use of digital assets (the “RFC”).1 The RFC is intended to help inform the Treasury Department as it prepares its report on digital assets required by President Biden’s March 2022 executive order titled “Ensuring Responsible Development of Digital Assets” (the “Executive Order”).2
Comments on the RFC are due by August 8, 2022. In this Legal Update, we provide the background on the Executive Order, summarize the RFC, and discuss how the RFC fits into the larger policy discussions on the regulation of digital assets.
On March 9, 2022, President Biden signed the Executive Order, which directed a broad range of federal agencies to recommend legislative and regulatory proposals to foster the development of, and address the risks presented by, digital assets and a central bank digital currency.3 Section 5(b)(i) of the Executive Order directed the secretary of the Treasury, in consultation with others in the federal government, to report to the president on the implications of the development and adoption of digital assets and changes in financial market and payment infrastructures for US consumers, investors, businesses, and the impact on equitable economic growth. The report must address the conditions that would drive mass adoption of different types of digital assets and the risks and opportunities this growth might present to US consumers, investors, and businesses, including with a focus on how technological innovation may impact these efforts and with an eye toward those most vulnerable to disparate impacts.
The RFC is intended to solicit information that will help the Treasury Department draft the report required by the Executive Order. The RFC is brief and contains six multi-part questions that address:
- The current level of adoption of digital assets and factors that would further facilitate mass adoption;
- The main opportunities for consumers, investors, and businesses from digital assets;
- General risks in digital assets financial markets;
- Potential risks to consumers, investors, and businesses that may arise through engagement with digital assets; and
- Whether and how digital assets can benefit underbanked, the most vulnerable, and other underserved Americans’ access to safe, affordable, and reliable financial services and the risks posed to these persons by digital assets.
Because the RFC questions are broadly worded and each contains a laundry list of specific questions, commentators should be able to provide the Treasury Department with their views on nearly any major issue that could impact how digital assets may impact consumers, investors, and businesses. Hence, the RFC provides an excellent opportunity for the public to provide its views and help shape the Treasury’s report and the administration’s ultimately policy on digital assets.
The RFC was issued the same week that both Treasury Under Secretary Nellie Liang and Federal Reserve Vice Chair Lael Brainard gave speeches that highlighted the financial stability risks posed by digital assets, particularly stablecoins, and the need for macro-prudential regulation to address these risks.4 Along with the RFC, these speeches signal that the Biden administration has made addressing the systemic risks posed by digital assets a policy priority. As we have noted in prior Legal Updates, there is interest in Congress in passing digital asset legislation, but with few legislative days left in the 117th Congress and many other priorities still to be completed (including a revised Build Back Better bill, the United States Competition and Innovation Act conference committee, and scores of nominations), the congressional calendar is a significant obstacle to digital asset legislation this year. Yet, if the Treasury Department uses the information it collects through the RFC to produce a report that helps develop a consensus around the appropriate regulatory regime for digital assets, it could help build momentum for a legislative effort in the 118th Congress.5
1 87 Fed. Reg. 40,881 (July 8, 2022), https://www.federalregister.gov/documents/2022/07/08/2022-14588/ensuring-responsible-development-of-digital-assets-request-for-comment.
2 See our Legal Update on the executive order: https://www.mayerbrown.com/en/perspectives-events/publications/2022/03/biden-executive-order-calls-for-regulatory-proposals-on-digital-assets-and-central-bank-digital-currency.
4 Remarks by Under Secretary for Domestic Finance Nellie Liang at King’s College London’s Global Banking and Finance Conference | U.S. Department of the Treasury; Speech by Vice Chair Brainard on crypto-assets and decentralized finance through a financial stability lens - Federal Reserve Board.