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JONES DAY PRESENTS®: Crypto Markets Expand as Biden Calls for All-of-Government Approach to Regs

Jones Day’s Josh Sterling, Dorothy Giobbe, and Abradat Kamalpour discuss the Biden Administration’s cryptocurrency Executive Order, including its potential impact on the U.S. financial system, the importance of strategic regulation, and the move toward a digital economy.

Read the full transcript below:

Josh Sterling:

The executive order is commanding an all-of-government approach to getting a handle on digital assets and blockchain technology. That extends to the area where I typically operate, which will be financial services and commodities. It extends well beyond that to things like national security. It even gets to the heart of it all with desire to explore a central bank digital currency, a CBDC. So we're looking at blockchain in that context principally as money and what that will mean for the financial system of the United States. Our currency is currently the reserve currency of the world. There's a sense that currency might benefit from becoming more blockchain-enabled. And it's also requiring a number of different regulators to look at really 20th century frameworks that have antecedents going back, in some cases, hundreds of years to regulate financial markets and see whether they actually make sense now. The laws and regulations that have applied to securities in particular and commodities for the past a hundred years are probably not fully equipped to deal with the digital economy that's coming to fruition now in the 21st century.

Dorothy Giobbe:

Have entities and companies and participants wanting to engage in this ecosystem, but have a lack of clarity in some respects about what regulations apply, what laws they need to follow.

Abradat Kamalpour:

It's really difficult to regulate something growing so fast. And in many product lines, it's very difficult for someone to categorize what these products are. Are they securities or are they not securities? Putting a blanket definition that captures everything as a particular traditional asset is a mistake. New thought needs to be given and new regulation needs to be done, but importantly, strategically, not haphazard. Not having regulators debate with each other on who owns the space. There needs to be a real strategic plan around this and hopefully the president's executive order will lead to that.

Josh Sterling:

The order itself, because it takes an all-of-government approach has a very long time scale on it. In the coming months, we'll see different agencies issue reports, perhaps solicited comments. We'll see the Financial Stability Oversight Council or FSOC come together and have considerable responsibility for that. We'll continue to look to the Fed and I believe the Federal Reserve Bank in Boston to understand their work on central bank digital currencies or CBDCs. That will take a long time. At the same time, there are committees on Capitol Hill that are seeking public input, trying to explore what makes sense here what is sensible and intelligent innovation compared to what are things that are completely inappropriate or potentially harmful? Whether that consumers, retail investors, or frankly, the national security interest of the United States government. I see a significant degree of engagement in Washington, D.C. really ramping up between the industry, Capitol Hill and the regulators as a result of the president's executive order. I think meanwhile, the market for digital assets will continue to change, proliferate and go in unexpected ways. But what I can absolutely predict is that we will continue to see something new we haven't expected before, because I firmly believe we are really at the beginning finally of the 21st century in digital assets when it comes to financial markets.

Dorothy Giobbe:

We are much further along the path to an understanding of regulatory treatment and coordination of regulatory efforts than we are now. Five years ago, who could have imagined that there would be an executive order directing the various parts of the US government to coordinate on the treatment of digital assets? But here we are today. So four or five years is a lifetime in the crypto asset space and the digital asset space.

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