The Chamber of Digital Commerce submitted a response to the U.S. Department of the Treasury’s Request For Comment (RFC) on illicit finance and national security risks of digital assets pursuant to Executive Order 14067 – “Ensuring Responsible Development of Digital Assets,” and the U.S. Treasury’s Illicit Finance Action Plan.

  • The Chamber’s response focuses primarily on opportunities to efficiently address digital-asset-related security risks, specifically in non-fungible tokens (NFTs) and decentralized finance (DeFi), and emphasizes the need for increased public-private collaboration and information sharing.
  • This request follows Treasury’s July 2022 RFC on risks and opportunities facing digital assets, which the Chamber also provided feedback, and is part of a broader policy initiative by the Biden Administration to set forth a regulatory framework on digital assets.
  • Read the entire response here.

The Chamber’s comments emphasize several themes that bear repeating and are consistent with previous responses to the government. They include:

  1. Risk vs. Opportunity – The discussion of risks in digital assets should not be considered in a silo but in comparison to legacy systems that struggle with the same risks.
  2. Principles vs. Rules – Legacy systems and digital asset systems need to adhere to similar principles with respect to illicit finance and anti-money laundering rules, but not through identical rules.
  3. Information Sharing – In addressing illicit finance risks, there needs to be me more sharing between the public and private sectors.
  4. Regulator Cooperation rather than Competition – We support efforts to root out illicit actors by regulators but it appears multiple regulators are competing for primary roles.

Digital asset companies, acting in good faith, don’t have clear regulatory expectations. The rules to the road need to be better defined and the threat of enforcement without clear rules is problematic.

The Chambers response addresses illicit financial risks from a wide range of topics such as technological innovations to non-fungible tokens (NFTs) to decentralized finance and peer-to-peer payment technologies. It also touches upon aspects of anti-money laundering and countering the financing of terrorism controls.

What’s next: It doesn’t appear the Congress, having introduced over 74 digital asset-related pieces of legislation this session, will pass any legislation this year. So, any regulatory developments or guidance in the near-term – if any – is likely to come from the executive branch.

A thank you to Jamal El Hindi, MJ Shin, and Weisiyu Jiang from Clifford Chance LLP for leading our response to the Treasury Request on Illicit Finance, National Security Risks of Digital Assets