November 3, 2022

United States Department of the Treasury
1500 Pennsylvania Avenue NW
Washington, D.C. 20220

Re: Ensuring Responsible Development of Digital Assets; Request for Comment on Digital-Asset Related Illicit Finance and National Security Risks

Ladies and Gentlemen:

The Securities and Financial Markets Association (“SIFMA”) appreciates the opportunity to respond to the Treasury Department’s September 20, 2022 Request for Comment (“RFC”) on “Ensuring Responsible Development of Digital Assets” as it pertains to illicit finance and national security risks.1 SIFMA supports the development of safe, regulated digital asset markets, and are encouraged by the ongoing work that was directed by the Executive Order 14067, “Ensuring Responsible Development of Digital Assets”
(hereafter “the Executive Order”).2  This effort, which has already resulted in the publication of several well-considered reports, is an important step towards a better understanding of the evolving digital assets marketplace and its prospects; how responsible innovation can serve and protect investors; and more generally, how the United States can ensure that it retains the same leadership role in digital asset capital markets as it has in the “traditional” capital markets space.

In this letter, we:

• Illustrate how regulated financial institutions (both banks and non-banks, such as our broker-dealer members) are well-positioned to manage the illicit financing risks posed by digital assets;
• Suggest that regulators review existing rules and operating models to best engage with digital assets and blockchain infrastructure;
• Describe how new digital ledger technologies (“DLT”) can be employed to help better manage illicit financing risks; and
• And posit that a “wholesale” CBDC (“wCBDC”) or alternative which builds on the existing role of regulated financial institutions would allow for better management of illicit financing risks relative to a more widely adopted “retail” (“rCBDC”) model.

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1 87 Fed. Reg. 57556 (Sept. 20, 2022), https://www.govinfo.gov/content/pkg/FR-2022-09-20/pdf/2022-20279.pdf.
2 Exec. Order No. 14067, 87 Fed. Reg. 14143 (Mar. 14, 2022), https://www.federalregister.gov/documents/2022/
03/14/2022-05471/ensuring-responsible-development-of-digital-assets.