The Digital Asset Executive Order identifies six key risks relating to digital assets:
- Financial risks – without sufficient oversight and standards, there is a risk of inadequate protections for sensitive financial data, custodial and other arrangements relating to customer assets and funds, and insufficient disclosure of the risks of investing in digital assets.
- Systemic risk – digital asset trading platforms and service providers may fall outside the existing scope of regulations and supervision. The novel and unique uses and functions of digital assets may create additional economic and financial risks that need to be addressed.
- Illicit finance and national security risks – misuse of digital assets may present illicit finance risks, including money laundering, cybercrime and ransomware, narcotics and human trafficking, and terrorism and proliferation financing. Digital assets may also be used to evade U.S. and foreign financial sanctions regimes and other tools and authorities. Jurisdictions which fail to implement the international standards for the regulation of digital assets for anti-money laundering and countering terrorist financing (AML/CTF) set by the Financial Action Task Force (FATF), or inadequately implement those standards, can pose significant illicit financing risks for the U.S. and global financial systems. The perpetrators of ransomware incidents and other cybercrime often take advantage of discrepancies between competing jurisdictions to launder and liquidate their illicit proceeds. Without controls to counter illicit finance, the growth in decentralised finance (DeFi) applications and peer-to-peer payments could also pose additional market and national security risks in the future.
- Unequal access to safe and affordable financial services – many Americans are underbanked and the costs of international funds transfers and payments are high.