A White House blog post said that the administration has been researching the potential risks posed by cryptocurrency for the last year and assessing how different authorities can mitigate those risks.
“As an administration, our focus is on continuing to ensure that cryptocurrencies cannot undermine financial stability, to protect investors, and to hold bad actors accountable...experts across the administration have laid out the first-ever framework for developing digital assets in a safe, responsible way while addressing the risks they pose. To be sure, the technologies powering cryptocurrencies may offer ways to make payments faster, cheaper, and safer. But this framework identifies clear risks,” Brian Deese, Arati Prabhakar, Cecilia Rouse, and Jake Sullivan said in the blog post. “The Administration wholeheartedly supports responsible technological innovations that make financial services cheaper, faster, safer, and more accessible. Yet to realize these benefits, new technologies need commensurate safeguards.”
Last year was marked by a “wave of insolvencies,” the blog said. But little negative impact has been seen for the broader financial system. The National Economic Council found that financial regulations and basic risk controls were ignored by some cryptocurrency entities. They may have “misled consumers, engaged in fraud, or failed to make appropriate disclosures.” The industry was condemned for poor cybersecurity.
Binance, the world's largest crypto exchange, proactively ramped up efforts to combat cybercrime and prevent fraud. Tigran Gambaryan, Binance’s head of Intelligence and Investigations, shared a summary of the work it did in 2022 to combat financial cybercrime. A former IRS special agent at its Criminal Investigation Cyber Crimes Unit for more than 10 years, he said Binance increased its compliance and security team by more than 500%, hiring staff who previously worked for investigative organizations and law enforcement agencies.
Binance responded to more than 47,000 requests from law enforcement agencies between November 2021 and December 2022 with an average response time of three days, its work summary reported. Many traditional financial institutions take months to respond. In working with law enforcement partners, Binance helped to recover millions of dollars for the victims of cybercrimes. It held more than 70 workshops and training sessions to share knowledge and tools with law enforcement agencies and prosecutors to help them identify and combat cybercrimes.
The NEC blog post called on regulators to continue issuing guidance and working to limit the exposure of financial institutions to the crypto sector. It encouraged Congressional action that would prevent customer asset misuse through an expansion of regulators’ powers and would mitigate conflicts of interest. The post suggested that lawmakers could increase transparency and disclosure requirements for crypto entities and increase the penalties for breaking illicit-finance laws and increase funding for law enforcement efforts.
The blog post authors suggested that Congress should not pass legislation that would make it easier for traditional financial institutions to engage more deeply with crypto as their limited exposure prevented the turmoil from infecting the broader financial system.
Axios speculated that the White House's blog post signals “hostility” towards crypto and could mean it’s unlikely that Congress will pass any crypto-related bills this year.
