Biden administration releases first framework for cryptocurrencies

US President Joe Biden's administration released Friday its first comprehensive framework of cryptocurrencies and digital assets.

The much-anticipated framework, which aims for responsible development in the cryptocurrency market, is a result of an executive order that Biden had signed in March, which asks government agencies to explore the risks and benefits of cryptos.

While digital assets present potential opportunities to reinforce US leadership in the global financial system, they also pose real risks as evidenced by recent events in crypto markets, such as the crash of stable coin TerraUSD, known as UST, in May that erased over $600 billion from the market, the White House said in a statement.

After deliberate study, various government agencies have identified six key priorities -- consumer and investor protection; promoting financial stability; countering illicit finance; US leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation.

US regulators, such as the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC), are asked to "aggressively pursue investigations and enforcement actions against unlawful practices in the digital assets space."

Consumer Financial Protection Bureau (CFPB) and Federal Trade Commission (FTC) are also encouraged to "redouble their efforts to monitor consumer complaints and to enforce against unfair, deceptive, or abusive practices."

The Treasury Department will complete an illicit finance risk assessment on decentralized finance by the end of February 2023 and an assessment on non-fungible tokens by July 2023, according to the statement.

Relevant government departments and agencies are required to continue to expose and disrupt illicit actors and address the abuse of digital assets, in order to hold cybercriminals responsible for their illicit activity and identify national security risks, it added.

The administration also stressed the importance of developing a US central bank digital currency (CBDC), a digital form of the American dollar, and listed the benefits of a CBDC as an efficient payment system, promoting further technological innovation, and enabling faster cross-border transactions.

After the release of the framework, price of Bitcoin briefly dove to $19,484 at 9.59 a.m. EDT before climbing back above $19,600 at 10.22 a.m. EDT for a daily loss of 2%.