U.S. Passes the Financial Technology Protection Act of 2023
In recent years, the financial technology sector has continued to grow rapidly, bringing numerous challenges to regulatory bodies. The U.S. Congress, with the introduction of Bill HR2969 on 04/27/2023, aimed to significantly change the approach of financial institutions toward digital financial services. Before the conclusion of the second session of the 118th Congress, the United States passed the Financial Technology Protection Act of 2023 (“FTPA”, “the Act”).
The FTPA promotes collaboration between the public and private sectors to prevent the illegal use of digital assets and enhance their security. The Act provides for the establishment of the Independent Financial Technology Task Force (“Task Force”) within the Department of the Treasury. The Task Force is intended to investigate illegal financial activities such as terrorism and money laundering, and to develop legal and regulatory recommendations to combat these threats.
#### A. Overview of the FTPA
**I. The Task Force:**
The Independent Financial Technology Task Force established within the Department of the Treasury comprises representatives from several federal agencies, including the Department of Justice, FBI, IRS, CIA, and DHS. Additionally, five representatives from the financial technology sector will also be part of this group.
It has been decided that within one year of the enactment of this Act, and annually for three years thereafter, the Task Force will submit a report containing the findings and recommendations developed by the Task Force to the Secretary of the Treasury, the heads of each agency represented in the Task Force, and the appropriate Congressional committees.
The Act stipulates that all authorities granted will expire when the activities of the Task Force conclude, and any remaining funds allocated to the Task Force will revert to the Treasury. However, this will not affect any ongoing investigations, recommendations, or other related activities as of the Task Force's termination date, which will continue until completion.
**II. Objectives and Duties:**
The Task Force is tasked with investigating the illegal use of digital assets for purposes such as terrorism and money laundering and, in this context, identifying threats related to digital assets and developing recommendations to counter these threats.
Within one hundred eighty days of the Act's enactment, the President, through the Secretary of the Treasury and in consultation with the head of each agency represented in the Task Force, shall submit a report to the appropriate Congressional committees divided into two sections:
(i) Potential uses of digital assets and other emerging technologies by states, non-state actors, foreign terrorist organizations, and other terrorist groups to evade sanctions, finance terrorism, or launder money, and how this poses a threat to U.S. national security;
(ii) A strategy on how the United States can reduce and prevent the illegal use of digital assets and other emerging technologies.
The Act also addresses the format and versions of the report to be made available to the public; any reliable publications, databases, or web-based resources; and information sources compiled by any government agency, civil society organization, or other entities, to be included in the strategy's implementation and reporting processes to the appropriate Congressional committees.
**III. Digital Assets and Innovation:**
The Act encourages technological innovation to ensure the secure use of digital assets and blockchain technology. Specifically, financial institutions may need to update their systems to manage digital asset transactions securely. The need for qualified efforts by the Task Force to develop laws in this regard is becoming more apparent.
**IV. Public and Private Sector Collaboration:**
Under the FTPA, a collaboration model has been established between the public and private sectors to enhance the security of digital assets and prevent their illegal use. The project aims to promote the secure use of digital assets and blockchain technology while developing innovative solutions in cybersecurity and risk management. Joint working groups with the public and private sectors, security monitoring and risk assessment mechanisms, information and data-sharing platforms, education and awareness programs, and research and development projects will be implemented to develop effective strategies.
Indeed, with these collaborative projects, the United States aims to assume a global leadership role in the field of digital assets and blockchain technology. At the same time, it seeks to serve as a model for other countries by offering an international regulatory framework for blockchain technology. This U.S. initiative involves establishing a comprehensive regulatory framework to prevent the illegal use of digital assets, enhance the security of financial systems, and encourage technological innovation.
#### B. Conclusion
The FTPA outlines a strategy aimed at both supporting technological advancements and ensuring national security. Furthermore, the FTPA aims to establish a comprehensive regulatory framework to ensure the security of digital assets and blockchain technology. The enactment of this Act and the activities of the Task Force, along with the creation of projects for public and private sector collaboration, will serve as a guide for setting international standards and achieving compliance within the digital asset ecosystem.