Via Teleconference

(March 8, 2022)

6:21 P.M. EST

     MODERATOR:  Good evening, everyone.  Thank you for joining today’s press call to discuss President Biden’s new executive order on ensuring responsible innovation in digital assets.

     As a reminder, this call will be on background, attributed to a senior administration official, and the contents of this call are embargoed until tomorrow, Wednesday, March 9th, at 6:00 a.m.  By joining the call, you agree to these ground rules. 

     Prior to this call, I also shared a factsheet that is also under embargo until tomorrow at 6:00 a.m.

     For everyone’s awareness but not for reporting, our speakers today are [senior administration official], [senior administration official], and [senior administration official]. 

After we hear from our speakers, we will open up the call for Q&A.  And with that, I’ll turn it over to [senior administration official].

     SENIOR ADMINISTRATION OFFICIAL:  Thanks.  Thanks to all of you for joining us late in the day.

     Ensuring responsible innovation and evolution of the digital asset ecosystem is essential to our national security, financial stability, economic competitiveness, and continued global leadership.

     You all know that cryptocurrencies have seen explosive growth in recent years, reaching a $3 trillion market cap last November. 

     Without oversight, the explosive growth in cryptocurrency use would pose risks to Americans and to the stability of our businesses, our financial system, and our national security. 

     The absence of sufficient oversight can also provide opportunities for criminals and other malicious actors to leverage cryptocurrencies to launder the proceeds of their crimes or circumvent justly-applied sanctions. 

     At the same time, however, digital assets can also provide opportunities for American innovation and competitiveness, and promote financial inclusion.

     Innovation is central to America’s story and powers our economy, generating jobs and opportunities, creating and building new industries, and sustaining our global competitive edge and leadership.

     This innovation is also a critical factor in ensuring the long-term strength of key national security tools, like sanctions and anti-money laundering frameworks as well as other strategic benefits we reap from the role of the United States in the global financial system.

     I also want to underscore the significant international leadership role the United States has already played in the digital asset ecosystem, just as we have in technological and financial standard-setting throughout our history. 

     The United States also has the world’s oldest and most comprehensive regulatory framework for digital asset activities, which has enabled us to take leading roles in international fora and supporting key partners in building their own digital asset capacity.

     The United States led global efforts to adopt the first international standards on digital assets during our presidency of the Financial Action Task Force — FATF.  And we continue to drive implementation of those standards. 

     Under our G7 presidency, we established the G7 Digital Payments Expert Group to discuss Central Bank Digital Currencies, stablecoins, and other digital payment issues.

     To reinforce this leadership, the EO directs relevant departments and agencies to initiate research into the merits of a U.S. central bank digital currency, including an assessment of possible risks and benefits to consumers, investors, payment systems, implications for national security, human rights, and financial inclusion.  That effort will also lay out the measures that are needed to establish a central bank digital currency, or CBDC, should there be a determination that doing so is in the national interest.

     For context, over 100 countries are currently exploring or piloting central bank digital currencies for both cross-border and domestic use.  Many of these countries are also working together to set standards for CBDC design and cross-border systems, with implications for domestic and international priorities including the centrality of the U.S. dollar in the global financial system.

     This EO will help make sure we have a leadership role and a seat at the table.

     Now I’ll turn it over to my colleague.  As you just heard, they are [redacted]. 

     Over to you.

     SENIOR ADMINISTRATION OFFICIAL:  Thank you so much.  Good evening everyone, and thank you again for your time this evening.

     So, innovation is not only critical for our economic security but also for our national security, enabling us to maintain our technological and economic edge to compete and win in the 21st century. 

     But innovation must benefit all Americans, and that extends to innovation in the digital asset ecosystem.  The benefits and risks of digital asset systems are fundamentally dependent on their design and governance, so we must take steps to ensure this serves Americans’ interests.

     This executive order seeks to promote digital asset innovation while balancing their benefits and associated risk, and it does so in several ways.

     First, the EO establishes a comprehensive federal framework to ensure the United States continues to play a leading role in the innovation and governance of digital assets at home and abroad, consistent with our democratic values and to the benefit of U.S. global competitiveness.

     Second, the EO directs relevant departments and agencies to initiate research into the merits of a U.S. Central Bank Digital Currency, as [senior administration official] mentioned previously.

     This research, along with the framework we will develop for international engagement and competitiveness, will help ensure we preserve the critical role of the United States in the global financial system.

     This is critical for ensuring the strength of U.S. national security tools that we need to combat illicit actors, like rogue states and cybercriminals.

     Third, the EO calls for the development of a plan to mitigate the illicit finance and national security risks posed by the misuse of digital assets.

     The White House has already demonstrated leadership in this space by aligning departments and agencies to combat misuse of digital assets enabling the rise and spread of ransomware.

     The insufficiency of international implementation of anti-money laundering network and frameworks for digital assets is the greatest vulnerability of these ecosystems that criminals are currently exploiting.

     Most current digital asset systems were not designed with critical controls in mind like identity, sanctions screening, and revocability of illicit transactions.

     Similar to our efforts to secure software development under the cyber executive order, this executive order is a signal to industry on the need to build in the critical protections needed for financial systems so we can leverage these innovative technologies for our benefit.

     The U.S. government will be developing action plans and frameworks to drive this objective.

     In sum, the executive order recognizes and reinforces U.S. leadership in the global financial system, safeguards the long-term efficacy of critical national security tools like sanctions and anti-money laundering frameworks, ensuring the digital asset ecosystem evolves in a manner consistent with our democratic values and protects businesses, consumers, and the integrity of the global financial system.

This EO is represents a continuation of U.S. leadership on financial and technological standard-setting at home and abroad. We remain committed to working with allies in the broader digital asset community to shape the future of digital assets systems in a manner that’s inclusive, consistent with our democratic values, and safeguards the integrity of the global financial system. 

And with that, I’ll turn it over to my colleague, [senior administration official], to follow up and continue.  Thank you.

Over to you, [senior administration official].

SENIOR ADMINISTRATION OFFICIAL:  Thanks, [senior administration official]. 

As [senior administration officials] said, today’s announcement marks a necessary step forward in our efforts to promote responsible innovation in the digital asset space, leveraging technology, and working with the private sector to help build an economy from the bottom up and the middle out.

Fundamentally, an American approach to digital assets is one that encourages responsible innovation by decisively mitigating the risks, in particular the financial stability and consumer protection risks.

We need to be clear-eyed that certain earlier forms of financial innovation have ended up hurting American families while making a small group of people very rich.  That underscores the need for robust consumer and investor protection. 

As digital assets have grown, investors have poured in.  Around 16 percent of adult Americans — approximately 40 million people — have ever invested in, traded, or used crypto currency based on recent surveys.  But some asset prices are volatile, regularly skyrocketing and sinking with real downsides for investors.  Bitcoin, for example, began the pandemic at $7,300, peaked at around $68,000 before falling back down to about $39,000. 

The President has put forward a holistic whole-of-government approach to understand and address not only the macroeconomic risks, but also the micro risk — that is the risk to each individual consumer, investor, and business that engages with these assets.

I want to emphasize why this executive order is significant in two key ways.  First, it reflects an extensive process informed by stakeholders across the federal government and many outside of government.  This process has identified key areas of present and future concern, and questions about the potential promise of these assets and their underlying technology. 

Chief among those is the need to guard individual consumers, investors, and businesses, as well as the financial system writ large, from the risks posed by the substantial growth in digital assets.  This includes the disparate impact risks that may arise from disparities in digital asset ownership. 

Second, it recognizes that our assessments of the risks and potential benefits of digital assets must include an understanding of how our financial system does and does not meet the current needs of consumers in a manner that is equitable, inclusive, and efficient. 

Antiquated payment infrastructure leaves the United States and its consumers with options that are slow, costly, or altogether inaccessible.  That’s particularly true of cross-border payments. 

That is why this executive order directs a report on the future of money and payment systems, including discussion of the conditions that drive broad adoption of these assets and the implications for the U.S. financial system and consumers. 

The executive order also places the highest urgency on research and potential development of the U.S. central bank digital currency. 

The government alone does not solve these problems, and definitely not a government that stays in its silos.  Therefore, we’ll continue to partner with all stakeholders — including industry, labor, consumer, and environmental groups, international allies and partners — to identify actions we can take to foster responsible innovation in the digital asset ecosystem, while mitigating the very real risk. 

Again, this executive order signals the beginning, not the conclusion, of this administration’s work around digital assets.  As this ecosystem evolves, so will our approach. 

And with that, I will give it back to you, [senior administration official].

Q    Hi, thank you so much for doing this.  I just am looking at a map that shows nine countries have already started — you know, launched a currency.  There’s 15 pilots underway; 16 countries have them in development.  Is the United States kind of getting to this market and this sector too late? 

And if you are now launching a 180-day study, you know, don’t you even put it off any further?  So how quickly can you go after the — after these reports come in?  And is there a risk of being at a competitive disadvantage to China and others?

SENIOR ADMINISTRATION OFFICIAL:  Maybe I’ll start on that, Andrea.  Thanks for the question.  I think the first thing to note from the EO is we’re placing the highest urgency on the effort to assess the potential benefits and the risks of a digital dollar on payment systems, on financial stability, on national security, on the implications for human rights, and financial inclusion. 

And these are critical design — all of these implications lead to critical design decisions.  And we’ve got to be very — very deliberate about that analysis because the implications of our moving in this direction are profound for the country that issues the world’s primary reserve currency. 

So, look, we can move quickly, but we can also move in a way that’s smart and that’s inclusive of the stakeholders both within our government and certainly outside our government.

Oh, I should say also on your second question, you know, on the digital one: I mean, here I want to be — I want to be very, very direct with my answer.  The primacy of the dollar — the U.S. dollar — it’s underpinned by fundamental advantages that the United States has held for a long time and continues to hold: credible and longstanding commitments to transparency, our rule of law, the contractual obligations and rights that everyone enjoys, the deepest and most liquid financial markets in the world, sound economic governance, and the full independence of our Federal Reserve system.  So those are the institutional features, the competitive advantages that give the dollar its primacy. 

     And really, the dollar’s role has been and will continue to be crucial to the stability of the international monetary system as a whole.  Foreign central bank digital currencies — I mean, their introduction by themselves do not threaten this dominance. 

     But, you know, we are — we are constantly assessing and monitoring any developments that relate to a core policy objective of ours, which is to maintain the centrality of the dollar in global financial markets and in the global economy.

     Q    Hi.  My first question is just logistical.  What is the timeline for some of the reports to be delivered or action to be taken?

     The second one is: What has your conversation been like with industry in developing this executive order?  You know, how have those conversations gone?  What’s the tenor of them?  And do you expect that they will be on board with the principles that you’ve laid out?

     SENIOR ADMINISTRATION OFFICIAL:  So I’m happy to start on that and then invite my colleagues to join.

     So on the timeframes, the executive order includes various timeframes consistent with the complexity of the particular reports and how much work has been done.

     So one of the key parts of the executive order is we want to fully leverage innovation while managing the risks.  And that means taking a careful look at both of those components and really bringing together stakeholders so that we make these decisions — as [senior administration official] noted, these are important decisions and we make them in a way that really sets us up for the long-term benefits and implications.

     So the EO will have a range of timeframes — some shorter, some 60 to 90 days; some longer, 180 days — in order to allow for that.

     And with regard to the engagement with industry, we’ve done a number of what we call “Crypto Sundays” where we brought in innovators on the technology side, individuals on the financial side to really understand the different elements of cryptocurrencies — for example, the types of services it will enable, like cross-country remittances — bringing down the cost of that, enabling the speed of that — as well as innovation in financial markets and, on the flip side, how the governance and design can be — and the technology of that can be navigated to ensure we manage some of the risks as well.

     So we’ve done extensive engagement to both be informed and also to test out ideas in the development, which was extensive, of this EO.

     Q    Hey.  I wanted to ask about next steps once these reports come in.  Is there a timeline for when you would want to maybe start thinking about regulation on some of these topics?

     And then my other question is — you mentioned sanctions at the top of the call.  I don’t see them mentioned in the fact sheet.  But are the sanctions and the concerns that have been raised about crypto being a workaround — are those going — is that going to be mentioned in this executive order?

     SENIOR ADMINISTRATION OFFICIAL:  [Senior administration official], you want to speak to that?  Or —

     SENIOR ADMINISTRATION OFFICIAL:  I don’t know.  [Senior administration official], do you want to talk about the sanctions aspect?

     SENIOR ADMINISTRATION OFFICIAL:  Yeah.  Maybe, [senior administration official], if you want to start on regulation and then [senior administration official] and I can do sanctions?

     SENIOR ADMINISTRATION OFFICIAL:  Sure.  So, look, I — we don’t want to pre-judge what we’re going to do before we’ve — the agencies have had time to do their work and produce their reports and analysis that we are asking them to do.

     That said, I think the entire premise of this executive order and the spirit behind it is that this is a growing area, an area that is presenting increasing risks and also potential opportunities, and that it’s important that we very quickly fully document and understand what those are and move quickly to address them.

     So my expectation would be that once the reports are finished on the accelerated timeline that the executive order requires that we would move quickly to try to act on the recommendations that they are providing — that they provide.

     [Senior administration official], do you want to talk about sanctions?

     SENIOR ADMINISTRATION OFFICIAL:  Sure.  [Senior administration official], I’ll start on this, and if there’s anything I miss, please add onto mine.

     So, first thing to say here is the U.S. government has long taken actions, including under law enforcement and existing Treasury authorities to combat the use of cryptocurrency to evade sanctions.  And right now, the administration is driving a priority effort on combatting the misuse of virtual currency.

     This was launched as part of the U.S. counter-ransomware strategy that has been underway for several months.  And the administration will continue to aggressively combat the misuse of cryptocurrency, including the use of it to evade U.S. sanctions.  And that stance equally applies to the — to the Russia-Ukraine crises, as it does to any other nation or regime or non-state actor that seeks to undermine U.S. national security.

     I will say, on Russia, in particular, the use of cryptocurrency we do not think is a viable workaround to the set of financial sanctions we’ve imposed across the entire Russian economy and, in particular, to its central bank.

     And, [senior administration official], over to you for anything I missed.

     SENIOR ADMINISTRATION OFFICIAL:  No, I think you really covered it all, [senior administration official].  We’re building on work that’s been underway over the last six to nine months really to counter use of cryptocurrency as part of ransomware and — including working with international partners on anti-money laundering.

     And hopefully, while we don’t see it in the current context in terms of Russia itself, the current crisis is a good opportunity for us to double down on that international work and help our partners build capacity to actually implement that anti-money laundering or cryptocurrency rules that we very much want to have in place.

Q    Thanks so much for doing the call.  And I don’t mean to be facetious here, but I’d love to know sort of how you characterize the importance of this executive order. 

It strikes me looking at it that a lot of this is ground that’s been trod before, particularly when it comes to central bank digital currency.  We just saw the report — the initial report from the Board of Governors, the subsequent report from the Reserve Bank of Boston, and it just seems like they’ve begun to dig into these issues in much the same way. 

And, you know, as you talk about the kind of cross-agency work on cybersecurity, certainly the Deputy Attorney General has talked a lot about the role the Justice Department is going to play looking into these issues, I just wonder if you see this as a reset or something more than that. 

I mean, I’ve listened to the CFTC chairman, the FCC chairman talk about what they see as their regulatory role here.  And I guess I’m just struggling, looking at the factsheet, to understand how this advances the work that has been done by the administration thus far.  Is it, again, to reset it, or to pull it under one agency or umbrella?  Just how would you convey the importance of this to somebody who is wondering what the notional progress is from seeing this EO.

SENIOR ADMINISTRATION OFFICIAL:  Please go ahead, [senior administration official].  I’ll follow you.

SENIOR ADMINISTRATION OFFICIAL:  I’m happy to.  And then we’ll work this — you can tell the close partnership among the three of us on this work. 

So, first, there hadn’t previously been an organized effort to bring together the expertise and authorities of the entire U.S. government to inform a holistic approach to digital assets.  And, in this case really, the partnership — the White House and specifically the National Security Advisor, the Economic Adviser chair — they’ll share this effort to ensure that we’re bringing together our national security and our economic policy in a coordinated way. 

So, you’re correct.  There’s been work done by Treasury, there’s been work done by financial regulators, but really pulling together the questions around consumer and investor protection, financial stability, and systemic and disparate risk — bringing that together and then, with a common approach, laying out a coordinated path is really the game changer here.

[Senior administration official], over to you.

SENIOR ADMINISTRATION OFFICIAL:  Yeah, I mean, just to add to what you said, I think the implications — we know the implications of potentially issuing a digital dollar are profound.  They’re extraordinarily wide-ranging.

So, this EO pulls together the expertise from across the U.S. government.  It also pulls — pulls in expertise views and perspectives from a range of stakeholders in our — in the country. 

And, you know, this is all about — this is all about the future of the payments system in this country, the future of credit creation, commercial banking.  We know the implications for national security, our ability to show leadership in setting global payment standards for privacy and security, but also reinforcing the efficacy of sanctions or potentially influencing the growth of private cryptocurrencies that we know are growing to a material scale and, in some cases, have facilitated illicit finance and financial stability. 

All of these issues are tied up in the question of whether to issue a digital currency, and, if so, how to do so in a way that advances our strategic objectives. 

And so this — this is a way to organize ourselves with urgency so that we have a coherent and coordinated view on digital assets and that it’s articulated at the very highest level of our government.  That’s why we’re doing it.

SENIOR ADMINISTRATION OFFICIAL:  Yeah, this is [senior administration official].  I would just add to what [senior administration officials] have said: that it’s notable because this is the President articulating his views about what our interests and concerns are in this space.  In fact, that is notable in and of itself. 

And I think it’s also important that — the emphasis that this document places on potential risks and the need to mitigate those risks.  You know, in a world — we live in a world where, you know, approaching 20 percent of Americans have invested in or traded or used cryptocurrencies.  This is not a niche issue anymore.   And it’s profoundly important that we have the right tools to mitigate the risks to consumers, to investors, and, frankly, to the entire financial system. 

And as [senior administration officials] said, getting — articulating those interests, getting all the work that has already been happening at agencies, getting that organized, getting the agencies talking with each other as appropriate to adequately address these issues — all of that is very important.

Q    Hi, folks.  Thanks for taking this.  I guess — some of my questions have been answered.  I guess I wanted to circle back on, I think, the Crypto Sundays that [senior administration official] mentioned.  How many of those did you guys do?  And was it only sort of innovators and industry representatives present?  Or did you also have, you know, some of the academics who have studied, you know, financial stability risks, consumer protection risks, governance issues that are present in the crypto market?  Thanks.  Academics and other — you know, other — other, I guess, experts and stuff.

SENIOR ADMINISTRATION OFFICIAL:  So, the less I share, you know, how often we work Sundays — I won’t go into how many Sundays there were, but will go into the question about who was included. 

There were — you know, our goal was noting this is a new space and really wanting to learn from as broad a space as possible and test those ideas.  It did include academics, innovators, to your point, as well as individuals from the sector as well.

And I want to emphasize, as well, the points that [senior administration officials] made.  You know, you see as well we tasked a number of studies in the EO to emphasize that we — this is an area needs some deep reflection to ensure that we can move out quickly following that and making some key decisions, both from a policy and an implementation perspective.

SENIOR ADMINISTRATION OFFICIAL:  Yeah, I would just add that there’s also meetings with consumer groups and other groups that are focused on some of those risks and that, you know, we purposefully tried to solicit views from experts and academics who have a diversity of viewpoints about the potential risks and benefits of cryptocurrency.  So, we tried to really get the full spectrum of the user.

SENIOR ADMINISTRATION OFFICIAL:  And I don’t — I can’t recall, just to be sure — I think, [senior administration official], you mentioned it just now — but we also heard quite a bit from those who want to solve the problems associated with financial inclusion.  You know, we know as recently as 2020, I think, over 5 percent of American households were unbanked.  That’s if not the highest, among the highest percentage among G7 countries.  And there’s a — there’s a multiple of that share that’s underbanked. 

And so we heard quite a bit about the reasons why those who are unbanked or underbanked are facing issues with financial inclusion, and many of them relate to high minimum balances or high fees they have to face in the existing architecture.  And so, it was important to hear their perspective and to understand how this effort can help solve that problem.

Q    Hi, thank you for taking my questions.  The last comment actually was very helpful because I’m interested in the comments that were made about how the current financial system doesn’t serve many Americans.  And I was hoping you could provide a bit more information from the surveys that you talked about regarding unbanked individuals investing in cryptocurrency.  Is there — are there numbers that you might have regarding that? 

And then one other question.  I’ve heard from sources — quite a few sources that say that this EO has not a lot to do with the current war in Ukraine, but I am curious about the timing of the executive order and if that was factored in whatsoever to it’s being released now.  Any information on that would also be helpful.

SENIOR ADMINISTRATION OFFICIAL:  Maybe I’ll start.  I’m sure — I’m sure both [senior administration officials] would like to add perspective.

First, on your last question, we’ve been working on this EO for many, many months, updating well before early November when Russia began to amass troops on Ukraine’s border.

In terms of the problems we’re trying to solve — and I’ll come to — I think [senior administration official] should speak to the financial inclusion issue.  But, you know, the payment system right now is quite costly in this country and, in some cases, quite slow, especially for payments across borders. 

You know, you can look to a number of objective analyses that show Americans pay over, I think, 2 percent of GDP in payment services.  And a lot of that has to do with high fees for credit cards.  And the primary payment source, which is bank deposits, they tend to get compensated with relatively low interest rates compared to wholesale money market rates, for example.

And, you know, it takes a long time for checks to clear, and wire transfers sometimes take even longer.  And so these are problems that are worth solving, worth understanding.  And that’s part of this effort.

You know, you referenced the financial inclusion surveys.  A lot — the numbers I was citing come from the FDIC, and I think they cite that over 5 percent of American households are unbanked and about 18 percent of households are underbanked.

SENIOR ADMINISTRATION OFFICIAL:  Yes, just to add to what [senior administration official] said.  I — you know, we — we have a clear problem with lack of access to basic banking services, as [senior administration official] has detailed. 

Our payment system for consumers, in many cases, is quite slow, and it takes a while for a check to actually be deposited into your account.  And that delay can end up being quite costly to people who need that payment for — to pay the rent, or pay utility bills, and so on. 

You know, what we are trying — one of the things that we are trying to do here is to fully understand how can digital assets help, if at all, in solving those problems.  I think that just the very fact that they are digital does not, you know, magically solve these problems.  And it’s not — based on what we know so far, it’s not the case that these assets completely eliminate transaction costs.  There are a variety of costs associated with holding and transferring them that resemble some of the problems that we have in our current payment system. 

So, the point is, there’s at least potential here to try to address a very serious problem that mainly affects, you know, lower-income, middle-class Americans.  And so we really want to try to get to the bottom of what we can do and how it would be possible to nurture innovation so it does help those folks rather than — rather than hurt them.

SENIOR ADMINISTRATION OFFICIAL:  Thank you, everyone, for joining our call this evening. 

As a reminder, the contents of this call are under embargo until 6:00 a.m. tomorrow morning, and the contents of this call should be attributed to a “senior administration official.”  Thank you.

 6:53 P.M. EST

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