In a report to President Trump entitled “A Financial System That Creates Economic Opportunities Nonbank Financials, Fintech, and Innovation”, the US Treasury described blockchain and distributed ledger technology as “promising innovations”. Its recommendation regarding cryptocurrency, however, is less clear.
The report examines existing and emerging trends in the current monetary system and makes more than 80 policy recommendations in response to President Trump’s Executive Order 13772 on Core Principles for Regulating the United States Financial System.
In the eyes of the Treasury, blockchain is a “technological tool” to be used by insurance stakeholders and financial services — who now demand the technology for peer-to-peer, usage-based business models.
Before “new” technologies such as blockchain are given the green light of regulation, the Treasury suggests all associated risks must be clarified and tested with due diligence. Speaking “from the perspective of regulators”, the Treasury states:
these technologies may pose unknown benefits and risks. In such situations, it would be beneficial for regulators to permit meaningful experimentation in the real world, subject to appropriate limitations.
Despite its recognition of blockchain, the report would appear hesitant to address cryptocurrency — what the Treasury may view as a political hot potato.
While targeting innovation and reform in the financial sector, the report only broaches the subject of cryptocurrency on but one occasion — referred to as “digital assets”. These assets, along with blockchain and distributed ledger technology, received “limited treatment” in the report, but are being explored by an interagency working group, according to the Treasury:
These technologies, as well as digital assets, are being explored separately in an interagency effort led by a working group of the Financial Stability Oversight Council. The working group is a convening mechanism to promote coordination among regulators as these technologies evolve.
To many, such statements may be seen as obsolete — coming three years after the US Federal Reserve elected Ripple to lead the Faster Payments Task Force, a state-sponsored initiative to test faster payment systems. The Treasury would appear to condone further trial within its domain, it seems.
In the wake of the SEC’s recent rejection of the Winklevoss twins’ Bitcoin ETF proposal, the cryptocurrency community will invariably scrutinize the report for clues of the US government’s stance on cryptocurrency.
Crucially, the report reiterates the announcement of the US’ new regulatory sandbox — which has allowed blockchain and cryptocurrency to enjoy state-supported growth in the UK, Hong Kong, and Singapore.
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