A Discussion of DOJ and Treasury Reports Following the Digital Assets Executive Order

Following the White House's Digital Assets Executive Order from March 2022 (summarized here), our September 2022 update provides an in-depth look at select follow-up reports issued by the U.S. Department of Justice and the U.S. Treasury over the past several weeks.

• U.S. Department of Justice Report Outlines Key Action Items to Address Criminal Activity Related to Digital Assets
  
• Addressing Digital Assets' Illicit Financing Risks: "Supporting Actions" Still Needed to Execute Treasury's Action Plan
  
• Treasury Recommends Moving Forward on CBDC Analysis and Encouraging Use of Instant Payments
  

Our analysis covers a broad range of topics, including the DOJ's Key Action Items to Address Criminal Activity Related to Digital Assets and Treasury's related "Action Plan" to Address Digital Assets' Illicit Financing Risks. We also provide key takeaways on Treasury's message regarding the future of payments: Move Forward on CBDC Analysis and Encourage Use of Instant Payments.

Overall, these reports overlap and echo consistent themes, helping fulfill the Biden administration's desired "whole-of-government" approach. They also signal a refreshing openness to exploring the potential benefits of digital assets across various use cases (e.g., expanded access to services, decreased transaction costs, and new opportunities to build wealth). This tone is balanced by a robust discussion of risks, including studies noting the prevalence of scams and thefts perpetrated by fraudsters in the crypto-asset markets. To help address these concerns, these reports provide Congress with a wide-ranging list of legislative recommendations, and all readers with a primer on the crypto-asset ecosystem.

But it could be months or even years before any new legislation is enacted or rules are proposed. Treasury's Crypto-Asset Risk report is clear: agencies can no longer wait for legislative direction, and we can therefore expect U.S. regulatory and law enforcement authorities to aggressively pursue investigations and enforcement actions, along with vigilant monitoring of the crypto-asset sector for unlawful activity.

In this period of regulation by enforcement, and in the absence of clear legislative federal frameworks, is responsible innovation achievable? The reports give us much to consider, along with some legislative direction.

We look forward to providing updates on relevant developments, and welcome your continued engagement.