[Federal Register Volume 87, Number 181 (Tuesday, September 20, 2022)]
[Notices]
[Pages 57556-57558]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-20279]


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DEPARTMENT OF THE TREASURY


Ensuring Responsible Development of Digital Assets; Request for 
Comment

AGENCY: Departmental Offices, Treasury.

ACTION: Request for comment.

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SUMMARY: This notice invites interested members of the public to 
provide input pursuant to The Executive Order of March 9, 2022, 
``Ensuring Responsible Development of Digital Assets.'' In particular, 
the Department invites comments on the digital-asset-related illicit 
finance and national security risks as well as the publicly released 
action plan to mitigate the risks.

DATES: Comments must be received on or before November 3, 2022.

ADDRESSES: You may submit comments via the Federal eRulemaking Portal: 
www.regulations.gov. Follow the instructions on the website for 
submitting comments.
    In general, all comments will be available for inspection at 
www.regulations.gov. Comments, including attachments and other 
supporting materials, are part of the public record. Do not submit any 
information in your comments or supporting materials that you consider 
confidential or inappropriate for public disclosure.

FOR FURTHER INFORMATION CONTACT: Jon Fishman, Assistant Director, 
Office of Strategic Policy, Terrorist Financing and Financial Crimes, 
202-622-5856, [email protected].

SUPPLEMENTARY INFORMATION: 

I. Background

    Executive Order 14067 of March 9, 2022, ``Ensuring Responsible 
Development of Digital Assets'' (hereafter ``Executive Order'') (87 FR 
14143; March 14, 2022), outlines principal U.S. policy objectives with 
respect to digital assets.\1\ These principal policy objectives are:
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    1. Protection of consumers, investors, and businesses in the United 
States.
    2. Protection of United States and global financial stability and 
the mitigation of systemic risk.
    3. Mitigation of illicit finance and national security risks posed 
by misuse of digital assets.
    4. Reinforcement of U.S. leadership in the global financial system 
and in technological and economic competitiveness, including through 
the responsible development of payment innovations and digital assets.

[[Page 57557]]

    5. Promotion of access to safe and affordable financial services.
    6. Support of technological advances that promote responsible 
development and use of digital assets.
    Section 7(a) provides that digital assets have facilitated 
sophisticated cybercrime-related financial networks and activity, 
including through ransomware activity. The growing use of digital 
assets in financial activity heightens risks of crimes such as money 
laundering, terrorist and proliferation financing, fraud and theft 
schemes, and corruption. These illicit activities highlight the need 
for ongoing scrutiny of the use of digital assets, the extent to which 
technological innovation may impact such activities, and exploration of 
opportunities to mitigate these risks through regulation, supervision, 
public-private engagement, oversight, and law enforcement.
    Section 7(c) directs the Secretary of the Treasury, in consultation 
with the Secretary of State, the Attorney General, the Secretary of 
Commerce, the Secretary of Homeland Security, the Director of the 
Office of Management and Budget, the Director of National Intelligence, 
and the heads of other relevant agencies shall develop a coordinated 
action plan based on the Strategy's conclusions for mitigating the 
digital-asset-related illicit finance and national security risks 
addressed in the updated strategy. The action plan shall address the 
role of law enforcement and measures to increase financial services 
providers' compliance with anti-money laundering and countering the 
financing of terrorism (AML/CFT) obligations related to digital asset 
activities.

II. Objective

    In September 2022, the Treasury Department submitted this action 
plan to the White House and publicly released the report. The digital 
asset ecosystem is rapidly evolving, and the Department of the Treasury 
is committed to continuing to monitor emerging risks in partnership 
with other U.S. government agencies, foreign governments, and the 
private sector, which will inform other potential actions to mitigate 
these risks. Through this request for comment (RFC), Treasury is 
requesting input from the public to understand the public's view on the 
emerging risks as well as what actions the U.S. government and Treasury 
Department should take to mitigate the risks. Through this RFC, 
Treasury also seeks to further understand how public-private 
collaboration may improve efforts to address the risks.

III. Request for Comments

    Treasury welcomes input on any matter that commenters believe is 
relevant to Treasury's ongoing efforts to assess the illicit finance 
risks associated with digital assets as well as the ongoing efforts to 
mitigate the risks. Commenters are encouraged to address any or all of 
the following questions, or to provide any other comments relevant to 
the development of the report. When responding to one or more of the 
questions below, please note in your response the number(s) of the 
questions to which you are responding. In all cases, to the extent 
possible, please cite any public data related to or that support your 
responses. If data are available, but non-public, describe such data to 
the extent permissible.

A. Illicit Finance Risks

    1. Has Treasury comprehensively defined the illicit financing risks 
associated with digital assets? Please list any key illicit financing 
risks that we have not raised in this Action Plan or the National Risk 
Assessment.
    2. How might future technological innovations in digital assets 
present new illicit finance risks or mitigate illicit finance risks?
    3. What are the illicit finance risks related to non-fungible 
tokens?
    4. What are the illicit finance risks related to decentralized 
finance (DeFi) and peer-to-peer payment technologies?

B. AML/CFT Regulation and Supervision

    1. What additional steps should the United States government take 
to more effectively deter, detect, and disrupt the misuse of digital 
assets and digital asset service providers by criminals?
    2. Are there specific areas related to AML/CFT and sanctions 
obligations with respect to digital assets that require additional 
clarity?
    3. What existing regulatory obligations in your view are not or no 
longer fit for purpose as it relates to digital assets? If you believe 
some are not fit for purpose, what alternative obligations should be 
imposed to effectively address illicit finance risks related to digital 
assets and vulnerabilities?
    4. What regulatory changes would help better mitigate illicit 
financing risks associated with digital assets?
    5. How can the U.S. government improve state-state and state-
federal coordination for AML/CFT regulation and supervision for digital 
assets?
    6. What additional steps should the U.S. government consider to 
combat ransomware?
    7. What additional steps should the U.S. government consider to 
address the illicit finance risks related to mixers and other 
anonymity-enhancing technologies?
    8. What steps should the U.S. government take to effectively 
mitigate the illicit finance risks related to DeFi?

C. Global Implementation of AML/CFT Standards

    1. How can Treasury most effectively support consistent 
implementation of global AML/CFT standards across jurisdictions for 
digital assets, including virtual assets and virtual asset service 
providers (VASP)?
    2. Are there specific countries or jurisdictions where the U.S. 
government should focus its efforts, through bilateral outreach and 
technical assistance, to strengthen foreign AML/CFT regimes related to 
virtual asset service providers?

D. Private Sector Engagement and AML/CFT Solutions

    1. How can Treasury maximize public-private and private-private 
information sharing on illicit finance and digital assets?
    2. How can the U.S. Department of the Treasury, in concert with 
other government agencies, improve guidance and public-private 
communication on AML/CFT and sanctions obligations with regard to 
digital assets?
    3. How can Treasury encourage the use of collaborative analytics to 
address illicit financing risks associated with digital assets while 
also respecting due process and privacy?
    4. What technological solutions designed to improve AML/CFT and 
sanctions compliance are being used by the private sector for digital 
assets? Can these technologies be employed to better identify and 
disrupt illicit finance associated with digital assets and if so, how?
    5. Are there additional steps the U.S. Government can take to 
promote the development and implementation of innovative technologies 
designed to improve AML/CFT compliance with respect to digital assets?
    6. How can law enforcement and supervisory efforts related to 
countering illicit finance in digital assets better integrate private 
sector resources?
    7. How can Treasury maximize the development and use of emerging 
technologies like blockchain analytics, travel rule solutions, or 
blockchain native AML/CFT solutions, to strengthen AML/CFT compliance 
related to digital assets?
    8. How can financial institutions offering digital assets better 
integrate

[[Page 57558]]

controls focused on fiat currency and digital asset transaction 
monitoring and customer identification information to more effectively 
identify, mitigate, and report illicit finance risks?

E. Central Bank Digital Currencies (CBDC)

    1. How can Treasury most effectively support the incorporation of 
AML/CFT controls into a potential U.S. CBDC design?

IV. Notes

    The term ``digital asset'' refers to all CBDCs, regardless of the 
technology used, and to other representations of value, financial 
assets and instruments, or claims that are used to make payments or 
investments, or to transmit or exchange funds or the equivalent 
thereof, that are issued or represented in digital form through the use 
of distributed ledger technology. Some examples of digital assets 
include cryptocurrencies, stablecoins, and CBDCs. Regardless of the 
label used, a digital asset may be, among other things, a security, a 
commodity, a derivative, or other financial product. Digital assets may 
be exchanged across digital asset trading platforms, including 
centralized and decentralized finance platforms, or through peer-to-
peer technologies.\2\
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    The term ``virtual asset'' refers to a subset of digital assets 
that does not include CBDCs or representations of other financial 
assets, such as digitized representations of existing securities or 
deposits.
    The term ``virtual asset service provider'' as defined by FATF, 
means any natural or legal person who is not covered elsewhere under 
the FATF Recommendations, and as a business conducts one or more of the 
following activities or operations for or on behalf of another natural 
or legal person:
    i. exchange between virtual assets and fiat currencies;
    ii. exchange between one or more forms of virtual assets;
    iii. transfer of virtual assets;
    iv. safekeeping and/or administration of virtual assets or 
instruments enabling control over virtual assets; and
    v. participation in and provision of financial services related to 
an issuer's offer and/or sale of a virtual asset.

Scott Rembrandt,
Deputy Assistant Secretary, Office of Terrorist Financing and Financial 
Crimes, U.S. Department of the Treasury.
[FR Doc. 2022-20279 Filed 9-19-22; 8:45 am]
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