The report, written by President Joe Biden's economic team members, suggests that Congress needs to act faster to provide regulatory clarification to the public.
Separating Crypto and Traditional Banking
The report calls for legislation to separate crypto banking from traditional banking, similar to the Glass-Steagall Act of 1933, which separated commercial and investment banking. The report also urges Congress to strengthen transparency and disclosure requirements for cryptocurrency companies to allow investors to make more informed decisions about financial and environmental risks.
Crypto Industry Risks and Harm to Investors
In the wake of major collapses in the stablecoin TerraUSD (UST) and the exchange FTX, the report reiterates that billions of institutional and retail investment money have evaporated, causing irreparable harm to investors, especially those who trusted cryptocurrency companies, including young people and people of color. The report also corrects false claims that the Federal Deposit Insurance Corporation insures crypto assets.
Crypto Cybercrime and National Security Risks
The report warns of poor cybersecurity across the industry that has enabled the Democratic People's Republic of Korea to steal over a billion dollars to fund its aggressive missile program. It urges law enforcement to be on the lookout for crypto cybercrime that could be used to fund terrorist organizations and rogue nation-state actors.
The Administration offered its support and guidance to law enforcement agencies, stating that Congress could strengthen penalties for violating illicit-finance rules and subject cryptocurrency intermediaries to bans against tipping off criminals.
Conclusion and Warning to Congress
The report concludes with a warning to Congress that it would ultimately be a "grave mistake to enact legislation that reverses course and deepens the ties between cryptocurrencies and the broader financial system."
It adds that innovation and creativity in the sector should ultimately co-mingle with increased regulatory safeguards and scrutiny to ensure that new technologies are secure and beneficial to all. The Administration supports responsible technological innovations that make financial services cheaper, faster, safer, and more accessible.