On March 9, President Joe Biden issued an executive order, “Executive Order on Ensuring Responsible Development of Digital Assets,” to facilitate a coordinated federal response to digital assets, including cryptocurrencies and related distributed ledger technology. While the executive order and accompanying fact sheet do not make specific reference to tax or the IRS, a number of directives identify the U.S. Department of the Treasury as either a primary agency or an agency providing consultation to other agencies; therefore, federal tax is likely to be addressed. Specifically, the executive order requires the secretary of the treasury to draft or contribute to the required reports for the president or to take other action, including:
- A report on the future of money and payment systems, including design options for a U.S. central bank digital currency; steps to increase adoption by and identification of risks for consumers, investors, and businesses; as well as legislative proposals.
- A report on the role of law enforcement agencies in detecting, investigating, and prosecuting criminal activity related to digital assets, including recommendations on regulatory or legislative actions. The IRS criminal investigation division is likely to continue its involvement with these efforts.
- A report on the effect of digital assets and cryptocurrencies on energy use and climate, as well as opportunities to use blockchain and related technologies in climate response and energy management activities.
- A convening of the Financial Stability Oversight Council and a report on financial stability issues, including recommendations for regulation, supervision, and legislation to mitigate risk.
- A coordinated action plan that includes anti-money laundering and efforts to counter the financing of terrorism actions. Given its past involvement in this area, the IRS is likely to be part of this action item.
- A framework for international engagement to develop standards and principals for digital assets.
- A framework to enhance competitiveness and leverage the benefits of digital assets.