The report reviews the specific financial stability risks and regulatory gaps posed by various types of digital assets and provides recommendations to address such risks. 

The report finds that cryptoasset activities "could pose risks to the stability of the U.S. financial system if their interconnections with the traditional financial system or their overall scale were to grow without adherence to or being paired with appropriate regulation, including enforcement of the existing regulatory structure." 

Although the existing regulatory system covers large parts of the cryptoasset ecosystem, the report identifies three gaps in the regulation of cryptoasset activities in the United States.

1. The spot markets for cryptoassets that are not securities are subject to limited direct federal regulation. As a result, those markets "may not feature robust rules and regulations designed to ensure orderly and transparent trading, prevent conflicts of interest and market manipulation, and protect investors and the economy more broadly."

2. Cryptoasset businesses "do not have a consistent or comprehensive regulatory framework" and can "engage in regulatory arbitrage". Some cryptoasset businesses may have affiliates or subsidiaries "operating under different regulatory frameworks, and no single regulator may have visibility into the risks across the entire business."

3. A number of cryptoasset trading platforms have proposed offering retail customers direct access to markets by "vertically integrating the services provided by intermediaries such as broker-dealers or futures commission merchants. Financial stability and investor protection implications may arise from retail investors’ exposure to certain practices commonly proposed by vertically integrated trading platforms, such as automated liquidation."

To address regulatory gaps, the Council recommends:

• the "passage of legislation providing for rulemaking authority for federal financial regulators over the spot market for cryptoassets that are not securities";
• steps to address "regulatory arbitrage including coordination, legislation regarding risks posed by stablecoins, legislation relating to regulators’ authorities to have visibility into, and otherwise supervise, the activities of all of the affiliates and subsidiaries of cryptoasset entities, and appropriate service provider regulation"; and 
• study of potential vertical integration by cryptoasset firms.

The Council also recommends "bolstering its members’ capacities related to data and to the analysis, monitoring, supervision, and regulation of cryptoasset activities."

The Treasury published a factsheet summarising the report’s key findings and recommendations.

The US Department of the Treasury published a statement by Secretary Yellen regarding the report.

The Acting Comptroller of the Currency Michael J. Hsu released a statement in support of the Financial Stability Oversight Council’s Report on Digital Asset Financial Stability Risks and Regulation.

Liang, who was speaking at the Brookings Institution, focussed on how digital assets could alter the future money and payments system in the US, and the recommendations in the report to prepare for that. 

The nine reports together "articulate a clear framework for responsible digital asset development and pave the way for further action at home and abroad". They call on agencies to promote "innovation by kickstarting private-sector research and development and helping cutting-edge U.S. firms find footholds in global markets".

But the reports also call for measures to mitigate the downside risks, such as increased enforcement of existing laws and the creation of "common-sense efficiency standards for cryptocurrency mining". 

Recognising the potential benefits and risks of a U.S. Central Bank Digital Currency (CBDC), the reports encourage the Federal Reserve to "continue its ongoing CBDC research, experimentation, and evaluation and call for the creation of a Treasury-led interagency working group to support the Federal Reserve’s efforts".

The report discusses the manner in which illicit actors are exploiting digital asset technologies; the challenges that digital assets pose to criminal investigations; initiatives that the department and law enforcement agencies have established as part of whole-of-government efforts to more effectively detect, investigate, prosecute, and otherwise disrupt these crimes; and recommended regulatory and legislative actions to further enhance law enforcement’s ability to address digital asset crimes.

The report identifies three proposals as priorities:

1) expanding to virtual asset service providers the laws preventing employees of financial institutions from tipping off suspects to ongoing investigations;

2) strengthening the law criminalizing the operation of unlicensed money transmitting businesses; and 

3) extending the statute of limitations of certain statutes to account for the complexities of digital assets investigations.

The DoJ also announced the establishment of the nationwide Digital Asset Coordinator (DAC) Network, in furtherance of the department’s efforts to "combat the growing threat posed by the illicit use of digital assets to the American public."

Led by the NCET, in close coordination with the Criminal Division’s Computer Crime and Intellectual Property Section and the Money Laundering and Asset Recovery Section’s Digital Currency Initiative, the DAC Network is composed of designated federal prosecutors from U.S. Attorneys’ Offices nationwide and the department’s litigating components. Each DAC will act as their office’s subject-matter expert on digital assets, serving as a first-line source of information and guidance about legal and technical matters related to these technologies.

Commenting on the announcements, Attorney General Merrick B. Garland said:

“As digital assets play a growing role in our global financial system, we must work in tandem with departments and agencies across government to prevent and disrupt the exploitation of these technologies to facilitate crime and undermine our national security.

“The efforts announced today reflect the commitment of the Justice Department and our law enforcement and regulatory partners to advancing the responsible development of digital assets, protecting the public from criminal actors in this ecosystem, and meeting the unique challenges these technologies pose.” 

The White House issued a fact sheet regarding the publication of the report.

The reports and their recommendations are:

Section 4: The Future of Money and Payments

This report reviews the current U.S. system of money and payments, including developments in instant payments and stablecoins. It also describes design choices for a potential U.S. Central Bank Digital Currency (CBDC) in the context of public policy considerations related to building the future of money and payments, supporting U.S. global financial leadership, advancing financial inclusion and equity, and minimising risks.

The Treasury also produced a fact sheet that summarises the key takeaways from the report.

Section 5: Cryptoassets: Implications for Consumers, Investors, and Businesses

This report reviews the current cryptoasset markets and trends that inform the potential opportunities and risks associated with their use. The report focuses on cryptoassets rather than digital assets more broadly as cryptoassets are currently at the centre of the consumer and investor experience. The report also discusses the implications of these opportunities and risks for consumers, investors, and businesses, with an eye towards those aspects affecting populations vulnerable to disparate impacts. 

Section 7: Action Plan to Address Illicit Financing Risks of Digital Assets.

This action plan responds to Section 7(c) of Executive Order (E.O.) 14067, “Ensuring Responsible Development of Digital Assets,” which calls for the development of a coordinated interagency action plan for mitigating the digital‑asset‑related illicit finance and national security risks as identified in the U.S. government’s National Strategy for Combating Terrorist and Other Illicit Financing (Illicit Financing Strategy). The Illicit Financing Strategy, which was informed by the Department of the Treasury’s National Risk Assessments (NRAs), outlines priorities and supporting actions to ensure that the U.S. government adapts the anti‑money‑laundering/countering‑the‑financing‑of‑terrorism regime to an evolving threat environment and accounts for structural and technological changes in financial services and markets. 

The White House issued a fact sheet regarding the publication of the reports.