The US government is cautiously moving forward by placing Executive Order for the responsible development of the Digital Asset eco-system by harnessing the benefits and addressing the underlying risks. Executive Order has identified six priorities based on which the policy framework would be developed:
- Financial Inclusion
- Investor Protection
- Financial Stability
- Countering Illicit Finance
- Leadership for Global Financial System
- Responsible Innovation
In recent times, the Digital Asset market has clocked tremendous growth touching a cumulative market capitalization of $3 Trillion. Millions of individuals across the world are entering the digital asset space by investing in it and its underlying technology. The awareness and education about digital assets have enabled many individuals to explore and enter space, building innovative decentralized solutions to further the global financial systems. This very fact stands recognized by the US and it is now planning to reinforce its leadership in this rapidly arising new financial system.
Recommendations for Policy Framework
The framework proposes grievances and complaint redressal along with mitigation of impending cyber risks with coordinated efforts of regulators like the Security and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC).
US Treasury to help the regulators with cyber-security risks and regulatory guidance to crypto firms. US Treasury has also been mandated to lead international cooperation through Organization for Economic Co-operation and Development (OECD) and the Financial Stability Board (FSB). US Treasury is also assessing the illicit finance risk of decentralized finances.
That should be recognized as a welcome move, as the authorities are taking cognizance of the large-scale opportunities presented by Blockchain Technology. The report also states the positive implication of US Central Bank Digital Currency (CBDC) for the economy, technology, and security. US administration has mandated the federal reserve to research and experiment on US CBDC.
Key Takeaways for Indian Policymakers
India could take some key points here for financial inclusion and investor protection. Indian policymakers could also bring an interim framework around virtual digital assets (VDAs) because the long-awaited crypto bill draft is still on-hold at the Department of Economic Affairs (DEA). However, crypto regulation uncertainties have already impacted Indian crypto entrepreneurs and web3 developers. Thus, it is inevitable for India to have a robust digital asset framework sooner than later on the back of the rising web3 brain drain.
With special assistance from Anuj Chaudhary