U.S. President’s Working Group Proposes Comprehensive Crypto Regulatory Framework

The U.S. President’s Working Group on Digital Asset Markets (PWG) has released a detailed report proposing a comprehensive framework for the regulation of cryptocurrencies and digital assets. This 166-page document is considered one of the most decisive crypto policy documents ever created by a major government, according to Galaxy.com.

Overview of the PWG Report

Chaired by David Sacks, the president’s special advisor for AI and crypto, the PWG was established following an executive order by President Trump shortly after his inauguration. The group was tasked with assessing government crypto policies and proposing a federal framework that includes regulatory and legislative recommendations. The PWG’s report is divided into two main parts: an analysis of market activities and risks, and a set of policy recommendations.

Key Recommendations

The report stresses the need for new legislation tailored to the unique characteristics of digital assets. It suggests granting significant authority to the Commodity Futures Trading Commission (CFTC) over crypto markets, promoting regulatory guidance for banks serving crypto firms, and supporting the application of traditional tax rules to digital assets. Additionally, it emphasizes the importance of not establishing a U.S. central bank digital currency (CBDC).

Market Structure and Regulatory Clarity

The PWG recommends creating a federal framework to classify digital assets into categories like security tokens and commodity tokens. This classification aims to provide a clear regulatory path for market participants. The report also supports the CLARITY Act, which seeks to define jurisdictional boundaries between the SEC and CFTC, facilitating joint rulemakings to ensure coherent regulation.

Stablecoins and Payment Solutions

The report advocates for the swift implementation of the GENIUS Act, which promotes the integrity of payment stablecoins and their role in maintaining U.S. dollar sovereignty. It opposes the development of a CBDC and supports the Anti-CBDC Surveillance State Act, which passed the House in July.

Countering Illicit Finance

In addressing anti-money laundering (AML) and countering the financing of terrorism (CFT), the report calls for crypto-specific financial institution types within the Bank Secrecy Act (BSA). It also suggests revisiting existing FinCEN guidance to better align with the unique aspects of the crypto industry.

Taxation of Digital Assets

The PWG proposes that Congress enact legislation applying wash sale rules to digital assets, aligning them with traditional securities. This would prevent crypto investors from claiming tax deductions on artificial losses. The report also encourages clearer guidance on the tax treatment of mining and staking rewards.

Conclusion

The PWG report marks a significant step towards a comprehensive regulatory framework for digital assets in the U.S. Its recommendations aim to promote responsible growth and use of digital assets while ensuring consumer protection and market integrity. As the report gains traction, it could pave the way for clearer legislation and regulatory guidance in the crypto industry.

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