President Biden issued an executive order on Wednesday outlining the first ever, full-government approach to addressing the risks and harnessing the potential benefits of digital assets and their underlying technology.

The executive order begins by observing, “Advances in digital and distributed ledger technology for financial services have led to dramatic growth in markets for digital assets, with profound implications for the protection of consumers, investors, and businesses, including data privacy and security; financial stability and systemic risk; crime; national security; the ability to exercise human rights; financial inclusion and equity; and energy demand and climate change.” 

A fact sheet issued by the White House notes that the executive order seeks an “unprecedented focus of coordinated action across all relevant U.S. Government agencies.” 

In a statement on the executive order issued by National Economic Council (NEC) Director Brian Deese and National Security Advisor Jake Sullivan, both officials said, ”Fundamentally, an American approach to digital assets is one that encourages innovation but mitigates the risks to consumers, investors, and businesses, broader financial stability, and the environment. We are clear-eyed that 'financial innovation’ of the past has too often not benefited working families, while exacerbating inequality and increasing systemic financial risk. This history underscores the need to build robust consumer and economic protections into digital asset development.” 

The order sets forth the following six objectives: to protect consumers, investors, and businesses in the United States; to protect U.S. and global financial stability and mitigate systemic risk; to mitigate the illicit finance and national security risks posed by misuse of digital assets; to reinforce U.S. leadership in the global financial system and in technological and economic competitiveness, including through the responsible development of payment innovations and digital assets; to reinforce U.S. leadership in the global financial system and in technological and economic competitiveness, including through the responsible development of payment innovations and digital assets; and to support technological advances that promote responsible development and use of digital assets.  

The executive order states also addresses the possibility of the United States developing a central bank digital currency (CBDC), saying, "My Administration places the highest urgency on research and development efforts into the potential design and deployment options of a United States CBDC. ... A United States CBDC may have the potential to support efficient and low-cost transactions, particularly for cross‑border funds transfers and payments, and to foster greater access to the financial system, with fewer of the risks posed by private sector-administered digital assets."

With regard to research into a U.S. CBDC, the executive order states, “Within 180 days of the date of this order, the Secretary of the Treasury, in consultation with the Secretary of State, the Attorney General, the Secretary of Commerce, the Secretary of Homeland Security, the Director of the Office of Management and Budget, the Director of National Intelligence, and the heads of other relevant agencies, shall submit to the President a report on the future of money and payment systems, including the conditions that drive broad adoption of digital assets; the extent to which technological innovation may influence these outcomes; and the implications for the United States financial system, the modernization of and changes to payment systems, economic growth, financial inclusion, and national security.”  

The executive order also addresses the security risks posed by cryptocurrency. Under the heading, “Actions to Limit Illicit Finance and Associated National Security Risks," the order states, “Digital assets have facilitated sophisticated cybercrime‑related financial networks and activity, including through ransomware activity. The growing use of digital assets in financial activity heightens risks of crimes such as money laundering, terrorist and proliferation financing, fraud and theft schemes, and corruption. These illicit activities highlight the need for ongoing scrutiny of the use of digital assets, the extent to which technological innovation may impact such activities, and exploration of opportunities to mitigate these risks through regulation, supervision, public‑private engagement, oversight, and law enforcement.” 

The order charges the Departments of Justice, Treasury and Homeland Security, with issuing a report within 90 days on "how to strengthen international law enforcement cooperation for detecting, investigating, and prosecuting criminal activity related to digital assets" Other federal agencies are also charged with issuing reports in their areas of  expertise. 

According to the Washington Post, the Russian invasion of Ukraine has concentrated the administration’s focus on both the opportunities and risks presented by digital currency. The Ukrainian government and its supporters have collected tens of millions of dollars in cryptocurrency donations since the invasion began. Yet some members of the Biden administration have raised concerns about the potential for Russians to use cryptocurrencies to avoid sanctions, while others say that the relatively small size of the digital asset market and the traceability of digital tokens through blockchain make it an unworkable option for  Russians who are targeted with sanctions.