Crypto Assets: From Off-Network to a Seat at the Table | Dorsey & Whitney LLP

The beginning

Crypto assets were initially “off the grid” and many early proponents celebrated the promise of their regulatory independence. While conventional assets were governed by a virtual alphabetical soup of federal and state regulations, new crypto assets were different. Tied to a new technology called blockchain, crypto assets offered a different approach to making profits and selling interest. Part of the appeal is in the simplicity. Avoid the Securities and Exchange Commission (SEC) registration process and all that complex paperwork; use a simple and brief “white paper”; raise the necessary capital; use a smart contract instead of a complex agreement. All new; that simple; all related to new technologies.

Interest exploded and audiences were mesmerized, even if they didn’t quite get it. It seemed like everyone wanted to jump on the bandwagon. The headlines were everywhere. Values ​​rose and fell at the speed of light, sometimes making massive winners and losers in moments. It was only a matter of time before US regulators stepped in to regulate this new asset class.


Regulators were driven to speculate on the new asset class early on, noting concerns such as consumer protection, market stability, safety and soundness. The Federal Deposit Insurance Corporation (FDIC), the Department of the Treasury (Treasury), the SEC, the Commodity Futures Trading Commission (CFTC), and the Financial Crimes Enforcement Network (FinCEN) have expressed interest to varying degrees in recent years.1 For example,

  • SEC investigated, saying some crypto assets were unregistered securities;2
  • The CFTC concluded that cryptocurrencies were a commodity subject to its jurisdiction;3 and
  • FinCEN has determined that there are AML issues.4

In response, industry players developing and investing in crypto-assets have often argued that traditional regulatory schemes do not apply.5 While those working in the new space often lost lawsuits from regulators such as the SEC, this failed to dull public interest and crypto holdings grew exponentially.

Today, the debate continues over the use, risk, and validity of crypto assets, but major regulators have recently begun signaling their intent to regulate these assets. Virtually all federal regulators are discussing crypto as a new asset class. For example:

  • The Federal Reserve recently published a study examining the possible benefits of a digital currency;6
  • The Treasury has issued statements regarding the risks associated with this asset class;7
  • FinCEN Releases New AML Regulations;8
  • SEC Chairman Gensler discussed the need for new legislation;9 and
  • A number of states have pending legislation regarding crypto assets.ten

However, a unified approach had failed to emerge from the fray, leaving many wondering which agencies would ultimately have the authority to regulate the crypto market and how any regulation might help or hurt the industry.

A new sheriff

Now a new sheriff has emerged – President Biden. On March 9, 2022, he signed a decree to ensure the responsible development of digital assets (the “Decree”).11 The Order, for the first time, outlines a “whole of government” approach to addressing the risks and benefits of digital assets. As stated in the order, the basic elements are:

  • consumer and investor protection;
  • financial stability;
  • responsible finance and inclusion;
  • American leadership in global finance; and
  • responsible innovation.

The Decree calls for measures to: 1) develop policy recommendations; 2) protect US global financial stability and mitigate risk; 3) mitigating illicit financing; 4) promote US leadership in technological and economic competitiveness with the Department of Commerce working across government to boost services; 5) promote equitable access to safe and affordable financial services; 6) direct the Secretary of the Treasury, in conjunction with others, to develop a report to support technological advancements and ensure the responsible development and use of this new asset class; and 7) explore a US central bank digital currency. The Biden administration will align U.S. and international interests, according to the order.

The future

President Biden’s landmark order adds urgent new impetus to regulators’ previously measured and deliberate exploration of crypto assets. Now, crypto is being given a seat at the table and seen as a partner to help drive the international economic leadership of the United States. Although there have always been problems and challenges from others, the United States has long been an international economic leader and its currency is the reserve currency of the world. President Biden’s executive order is designed to help maintain that leadership and meet the constant challenges of the position. There is no doubt that the outcome of this battle will have a huge international impact.

* * *

1 See, for example, FinCEN Application of FinCEN regulations to certain business models
Involving convertible virtual currencies
(FIN-2019-G001) (May 9, 2019) (available at: (latest accessed March 15, 2022); FDIC Request for information and feedback on digital assets (RIN 3064-ZA25), 86 Fed. Reg. 97 (21 May 2021); Foreign Assets Control Office Sanctions Compliance Tips for the Virtual Currency Industry (October 2021) (available at: (last accessed March 15, 2022); Joint Statement of Agencies, CFTC, FinCEN and SEC Leaders Issue Joint Statement on Activities Involving Digital Assets (October 11, 2019) (available at: (last accessed March 15, 2022); Press release, Treasury, Treasury continues anti-ransomware campaign as part of whole-of-government effort (October 15, 2021) (available at: (last accessed March 15, 2022) (addressing sanctions compliance issues for the currency industry Virtual).
2 See, for example, Press release, SEC, SEC Sanctions Operator of Bitcoin-Linked Exchange for Registration
(December 8, 2014) (available at: (last accessed March 15, 2022); Press Release, SEC, SEC Obtains Emergency Order Ending Diamond-Related ICO Program Targeting Hundreds of Investors (May 21, 2019) (available at: (last accessed March 15, 2022); Press Release, SEC, SEC accuses developer of cryptocurrency investment scams (18 Nov 2021) (available at: (last accessed 15 Mar 2022).
3 CFTC Written statement to the CFTC Global Markets Advisory Committee (October 9, 2014) (available at: (last accessed March 15, 2022 ).
4 FinCEN Notice of Illegal Activities Involving Convertible Virtual Currency (FIN-2019-A003) (May 9, 2019) (available at: . pdf) (last accessed March 15, 2022).
5 See, for example, Emma Newberry, Do We Need More Crypto Regulation? Two sides of the storyThe Ascent (October 21, 2021) (available at: /) (last accessed March 15, 2022) (briefly summarizing arguments for and against regulation).
6 Press release, Federal Reserve, The Federal Reserve Board releases a discussion paper that examines the pros and cons of a possible US central bank digital currency (CBDC) (January 20, 2022) (available at: (last accessed March 15, 2022).
7 See, for example, Press release, Treasury, Remarks by Under Secretary of the Treasury Wally Adeyemo at the LINKS conference presented by Chainalysis (available at: (last accessed March 15, 2022); Press release, Treasury, Treasury Releases National Money Laundering, Terrorist Financing and Proliferation Financing Risk Assessments (March 1, 2022) (available at: (last accessed: March 15, 2022).
8 FinCEN Notice of Proposed Rulemaking, Requirements for certain transactions involving convertible virtual currency or digital assets (RIN 1506-AB47) 85 Fed. Reg. 247 (23 December 2020).
9 See, for example, Katanga Johnson, US SEC Chairman Gensler calls on Congress to help rein in the crypto ‘Wild West’Reuters (August 3, 2021) (available at: ) (last accessed: March 15, 2022).
ten Heather Morton, Cryptocurrency Legislation 2022National Conference of State Legislatures (February 8, 2022) (available at: (last accessed: Mar. 15, 2022) (summarizing pending legislation in 31 states and Puerto Rico as of February 2022).
11 To see Executive Order 14067 of March 9, 2022, Executive Order on ensuring responsible development of digital assets (available at: (last accessed March 15, 2022).

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