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White House's proposed crypto framework will have 'global implications': Fmr. CFPB director

Kathy Kraninger, Solidus Labs VP of Regulatory Affairs and former Consumer Protection Financial Bureau Director, assesses the latest crypto regulation proposed by White House officials.

Video transcript

[MUSIC PLAYING]

RACHELLE AKUFFO: A new report out from the White House setting a framework for cryptocurrency regulation. Now, this framework outlines several action items, including how to crack down on fraud in the digital asset space. Well, here to discuss this release is Kathy Kraninger, Solidus Labs VP of Regulatory Affairs and former Consumer Protection Financial Bureau director. Good to have you back on the show. So first off, in terms of this framework, how far does it go in terms of addressing some of the concerns they have about how crypto is classified and who should be overseeing it?

KATHY KRANINGER: So thank you so much for having me with you again. Great to be here and a really banner day, frankly. There is a lot to absorb in the reports that were issued today, talking about 180 days after President Biden issued his executive order looking at agencies across the government to come together on a whole of government approach for how to think about digital assets and digital asset markets and blockchain technology. The industry has been saying there are a wide range of considerations here, and the administration responded on that.

So US competitiveness, national security, financial crime, consumer protection, so all of those things being taken into account and really formulating US policy as the US goes forward in a global marketplace and assesses its role. So certainly, one of the things that I take away from it is exactly that, that there are global implications here. And certainly when you look at issues like the concept of a US central bank digital currency being issued, that digital dollar, what does that look like, and what are the considerations? One of them is continued strength of the US dollar and our interests from a national security standpoint and US competitive standpoint.

RACHELLE AKUFFO: And what about for consumers? Obviously, you have this framework coming about, but for consumers who they see the headlines about some of these exchanges, what sort of protections? Do we get much detail on that side?

KATHY KRANINGER: Well, first and foremost, it's consistent with what the administration has been doing and saying. There are laws that apply today to this activity. Fraud is illegal. Theft is illegal. And so there is a reiteration that agencies should take enforcement actions consistent with current law. And that's certainly an important aspect of things.

In addition to that, recognition of, again, pulling other agencies into play and looking at coordinated actions. One of the ways you do that is through bodies like the Financial Literacy and Education Council. I was the vice chair of that group. It is government wide, and the importance of educating investors and the general public about how to engage with digital assets and the protections that you noted, some that are there, some that are not, and you also have a lot of deceptive advertising that happens in traditional finance. It happens outside of finance.

There is definitely an aspect of education to that and enforcement to that to go after entities that are engaged in deception. So that's called out in the report as well and something that certainly consumers should watch out for. And the last piece I would mention is just around some of the things that we know consumers have tended to come to expect in banking. So deposit insurance, we know that there are entities that were engaged in advertising that made it sound as though the assets would be protected just like they would be if you were engaging with bank deposits.

And so that kind of activity is not acceptable, and you see recent enforcement actions by the FDIC and the OCC and others around exactly those types of things. So that's the use of existing law to enforce in those ways. That's important. In terms of future protections, there's some discussion of it. We're still digging into all of the details there, a lot of it having to do with future payment systems and future cross-border activity with respect to transactions and what consumers should look for in those cases and how we can bring technology about that will really be beneficial to consumers and reduce some of those risks.

SEANA SMITH: Kathy, lots of discussion in this framework about the US Central bank digital currency. What does, though, that mean for existing cryptocurrencies?

KATHY KRANINGER: So there was definitely acknowledgment that Congress needs to provide authority for the CBDC and its continued work frankly, around what are the benefits? What specifically should that look like? And we saw that in the comments this morning that there was urgency around continued research and framing this out a little bit more. So I took that to mean decisions not yet made.

The report does lay out, I think fairly clearly, some of the dimensions about that, whether the benefit, for example, of a wholesale CBDC. So enabling really inter-bank transfers to be more efficient, to be settled more quickly, cross-border type dynamics again between financial institutions. That's the role I see, frankly, for a US CBDC, potentially.

I think there are a lot of things to work through on this front, though, and still very much a role for the private sector in payments. That's the system the US has always had. We're used to that. The private sector does bring great capabilities, so that's-- whether that's stablecoins or again, other technical mechanisms, there is an important partnership here with respect to the financial system we've built up over decades. And those private sector and government roles should continue, in my opinion. And so I think there is at least an acknowledgment of that balance in the report that was issued on the future of payments.

It also will be interesting to see how these companies and investors involved in this space respond to this framework. Kathy Kraninger, great to have you. Thanks so much for joining us.