20th Parliamentary Intelligence-Security Forum – Digital Assets: Cryptocurrencies, Stablecoins and CBDCs.

Mr. Boggs kicked off the discussion by hitting upon basics of cryptocurrency, explaining that blockchain acts as a public ledger of every transaction made with a particular cryptocurrency and allows for the verification of a transaction’s authenticity. That public ledger is shared across all computers in the network. The public nature of the ledger makes tracking most cryptocurrency transactions fairly straightforward, even more so for cryptocurrencies like Bitcoin, which publishes the location and the individual wallets taking part in a transaction. He also pointed out that blockchain’s use is not limited to just crypto. For example, it is being used for smart contracts, banking, video games, supply chain logistics and more.

He then discussed the uses of cryptocurrency. Like traditional fiat currencies, crypto can be used for both speculation as well as for a method of payment. Cryptocurrency appeals to users do to: (1) the ability to make transfers without an intermediary or geographic limitation, (2) finality of settlement, (3) lower transaction costs compared to other forms of payment, and (4) the ability to publicly verify transactions.

While cryptocurrency is used for legitimate, legal transactions, it also appeals to bad actors because of its pseudonymity, varying oversight and regulatory requirements by

country, convenience and quick transfer speeds. Illicit uses include money laundering, payment for illegal goods or services, terrorist financing, sanctions evasion and ransomware. Countries with weak or unenforced AML regulations serve as an ideal location to launder money, regardless of whether it is fiat or cryptocurrency.

Mr. Boggs said that the U.S. Congress has been focusing much more attention on cryptocurrency issues and as introduced approximately 20 bills just this year, including legislation that would exclude cryptocurrency from the definition of security and another measure that would amend the Securities Act to create a safe harbor providing a grace period of exemption from Securities Act registration requirements. In addition to federal legislation, Mr. Boggs also referenced that some 31 states have introduced legislation relating to blockchain and cryptocurrency.

Finally, he discussed the President’s Working Group on Financial Markets Report on Stablecoins that was issued on November 1, 2021. That report recommends that custodial wallet providers be subject to federal oversight, giving regulators the authority to mandate risk management standards, including capital and reserve requirements, and to limit the issuance of financial products tied to stablecoins.