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White House releases framework on crypto regulation

Yahoo Finance's Jennifer Schonberger breaks down the Treasury's three new reports laying out guidelines for regulating crypto, stablecoins, and a central bank digital currency.

Video Transcript

JARED BLIKRE: Welcome back. Cryptocurrency's in the spotlight, with Bitcoin following stocks lower and debate raging over the impact of Ethereum's long-awaited merge. But beneath all of this is ongoing uncertainty over the regulation of these assets. Biden administration calling out government agencies to provide recommendations for the sector, and some of those are finally here.

Yahoo Finance's Jennifer Schonberger has all the details. Jen, what is going on with crypto down in the Beltway?

JENNIFER SCHONBERGER: Good morning, Jared. Six months after President Biden directed agencies to come up with a government whole approach to regulating cryptocurrencies, the US Treasury is out with three brand new reports this morning warning that cryptocurrencies pose, quote, "meaningful risks to consumers, investors, and businesses if not properly regulated." The government also recommends moving forward with work on a central bank digital currency, but stopped short of recommending one.

While the report offers general recommendations for reining in risks, it doesn't offer ideas for specific regulation or legislation. One of the reports finds that consumers were regularly misled about crypto's features and expected returns, and that non-compliance with regulations is widespread. The reports encourage the SEC and CFTC to, quote, "aggressively pursue investigations and enforcement actions against crypto companies that aren't in compliance with laws."

The second of Treasury's three reports recommends moving forward with work on a central bank digital currency. While no decisions have been made to issue one, the report is meant to help policymakers understand the technical design choices of a CBDC system. The report finds a CBDC could enable a more efficient payment system that boosts economic growth and protects against cyber risks.

The government is moving forward to try to ready a CBDC with, quote, "the highest urgency" if it's deemed of interest, per the National Economic Council Director Brian Deese. Underscoring the seriousness, the White House is launching a CBDC working group, which includes multiple agencies, like the National Security Council and Treasury, to support the Federal Reserve's research efforts on a CBDC.

That group expected to meet regularly to discuss progress. Now, a third report lays out how to combat the risks of using crypto for financial crimes, like money laundering. The top Republican on the House Financial Services Committee looked at this report and said it is not a substitute for legislation. Jared.

JARED BLIKRE: Jennifer, I think we can all agree that we need another word for CBDC-- central bank digital currency.

JENNIFER SCHONBERGER: It's a bit of a tongue twister, isn't it?

JARED BLIKRE: It is, but saying CBDC 10 times-- we'll work on that. Jen Schonberger--

JENNIFER SCHONBERGER: Digital dollar. We'll call it the digital dollar.

JARED BLIKRE: Or a digital box, digital greenback-- something like that. I think we're on the right track here. All right, thank you for that report.