Innovation in Governance: Regulating Digital Assets — Robin Nunn
As part of the February 11 2022 ETHDenver Conference, I joined the Federal Reserve’s Sunayna Tuteja and IOHK’s Rachel Epstein for a conversation on Innovation in Governance moderated by Decrypt’s Jeff Benson. One of the most important issues we covered is what the U.S. is doing in order to establish regulation on digital assets. There are many concerns about stability and consumer protection, so people are keeping a close eye on the steps government is taking.
Our financial system is highly regulated and the current Federal structure is set up around more traditional entities, such as banks and broker-dealers. There are agencies fully established to monitor these institutions. However, the existing framework does not serve us well for digital assets. We have been struggling in trying to fit stablecoins, cryptocurrencies, and NFTs into boxes not intended for them. To add to the confusion, there is a patchwork quilt of state and local regulations. Given these varying parameters for certification and licensing, many companies in this space are looking for a national route to simplify matters.
Companies are not the only ones needing continuity and clarity; investors and consumers are also demanding reassurance. Not all of the digital asset entities are involved in money laundering and some of the skepticism is possibly unwarranted. But until we have a Federal framework of rules and regulations to give us guidance, people are going to be concerned about the risks.
This Presidential Administration is still relatively new and there are a number of vacancies that have to be filled in the FDIC, the Federal Reserve, the SEC, and the CFTC. All of these organizations control the financial sector and make important decisions with respect to new rules, new regulations, and new guidelines. That said, we do have government regulators in place who have recognized this challenge. The Presidential Working Group recently released a report on stablecoins recommending that the U.S. House of Representatives create new legislation. Subsequently, there was a hearing before the Senate Banking Committee where that report was discussed. Of course, we all know that getting House consensus on legislation will take time.
Since our February 11 panel discussion, there has been movement on the Federal front. On March 9, President Biden issued an Executive Order calling on the government to examine the risks and harness the potential benefits of digital assets. The Order lays out a national policy across six key priorities: consumer and investor protection; financial stability; illicit finance; U.S. leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation. The Executive Order gives federal agencies guidance in terms of how they can work together. We are making progress, but need to keep up the momentum.
About Robin Nunn: Robin leads one of the country’s preeminent banking and financial services practices. She works at the intersection of law, business, and government policy. Robin’s dual background in corporate and private practice provides her with valuable insights and perspectives. Although her experiences are broad, her focus is on current issues connected to new communication technologies.
