Ladies and Gentlemen:
The Bank Policy Institute[1] and the American Bankers Association appreciate the opportunity to comment on the White House Office of Science and Technology Policy’s request for public comments to help identify priorities for research and development related to digital assets[2] issued in connection with Executive Order 14067, “Ensuring Responsible Development of Digital Assets.”[3] The trades support the goal of the Executive Order to promote a coordinated, “whole of government” approach to fostering responsible innovation, which will help ensure that the United States remains a global leader in innovation while also ensuring that consumers, the financial system, and national security are protected. We recommend that the public and private sectors continue to collaborate on how to further responsible innovation in the United States, including through continued research and open dialogue.
The trades support responsible innovation conducted in a manner consistent with the safety and soundness of the financial system, anti–money-laundering (“AML”) and countering-the-financing-of- terrorism (“CFT”) standards, and robust consumer and investor protections. Digital assets and related activities have grown rapidly in recent years and have the potential to provide benefits to consumers and businesses and the financial system. As with any new technology, there are associated risks that must be carefully studied, mitigated, and managed through proper controls, regulation, and oversight.
Today, digital assets, though they may carry varying levels of risk, are often nevertheless broadly categorized.[4] Defining important terms and developing a comprehensive and harmonized lexicon for the various types of digital and crypto assets and entities active within the digital-asset ecosystem, and supporting infrastructures, will help authorities more effectively target the unique risks that each present. Authorities must distinguish among digital assets, cryptocurrencies, and tokenized assets, as well as the underlying distributed ledger technology (“DLT”) and blockchain infrastructure, which may differ in use across functions and activities, when they apply existing (or develop new) regulatory frameworks for them. For example, the volatility and related risks often cited in connection with “digital assets” or “crypto assets” refers to risks presented by non-bank issued cryptocurrencies and stablecoins (e.g., bitcoin and Tether)5, which operate on wholly different infrastructures and mechanisms of operation, but are comparatively different when using a distributed ledger network for use-cases other than cryptocurrencies.6 Traditional banking products and activities utilizing DLT, blockchain, or other novel technologies provided by federally insured or regulated banks or subsidiaries of bank and financial holding companies do not present the risks presented by non-bank crypto-asset service providers and non-bank issued cryptocurrencies or related activities because banks appropriately manage their risks and are subject to a comprehensive regulatory framework and consolidated supervision, audits and examinations. Policymakers should research and study how to develop a comprehensive framework to apply appropriate standards and oversight to address the risks presented by nonbanks engaging in cryptoasset-related activities, such as issuance and trading of cryptocurrencies, to preserve financial stability and protect consumers, investors, and businesses.
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[1] See Appendix for association descriptions.
[2] 88 Fed. Reg. 5043 (Jan. 26, 2023).
[3] 87 Fed. Reg. 14143 (March 14, 2022).
[4] For example, the RFI provides that the term “digital assets” refers to all CBDCs, regardless of the technology used, and to other representations of value, financial assets and instruments, or claims are issued or represented in digital form and that are used to make payments or investments, or to transmit or exchange funds or the equivalent thereof. For example, digital assets include cryptocurrencies, stablecoins, and CBDCs. Regardless of the label used, a digital asset may be, among other things, a security, a commodity, a derivative, or other financial product. Digital assets may be exchanged across digital asset trading platforms, including centralized and decentralized finance platforms, or through peer-to-peer technologies. For the purposes of this RFI, “digital assets” is also inclusive of its underlying technologies (e.g., DLT).
