President Biden ordered federal agencies to study implications of government-backed digital currency
The Federal Reserve is trying to figure out how to keep cash relevant in a cashless world. It is considering digitizing the US dollar, giving people money they can access on their phone and bypassing electronic payments that can be slow and costly for businesses.
President Biden’s executive order on cryptocurrencies directs his administration to consider the potential implications of a US digital dollar, which would be backed by the Federal Reserve.
The Fed is already evaluating the possibility of a digital currency, which some other countries, including China, have already adopted.
The Biden administration is putting its support behind the research and development of a “US Central Bank Digital Currency,” or CBDC.
The move is part of a sweeping executive order President Joe Biden signed Wednesday instructing the federal government to explore possible uses of and regulations for digital assets like cryptocurrencies.
“My Administration places the highest urgency on research and development efforts into the potential design and deployment options of a United States CBDC,” the executive order reads.
The order asks for a wide variety of agencies to begin research and submit reports on a variety of issues surrounding digital currencies, from design and security to financial and societal impacts.
“We know the implications of potentially issuing a digital dollar are profound. They’re extraordinarily wide-ranging,” a senior administration official told reporters on a call Tuesday.
Although a US digital currency would not necessarily change much in terms of everyday experiences like buying goods and services, economists say it could transform central and commercial banking, as well as government sanctions, banking accessibility and taxes.
The potential here is enormous, and it’s very interesting. The executive order will call on the government to investigate the technical needs for a digital currency and advocate for the Federal Reserve to continue its research and development, according to a fact sheet released by the White House.
The Fed published a white paper in January about potentially creating a CBDC that would complement existing payment systems. It found that a CBDC could make payments cheaper and easier for consumers but might also pose a risk to the stability of the US financial system.
In its fact sheet, the administration said it also would take steps to “mitigate the illicit finance and national security risks posed by the illicit use of digital assets by directing an unprecedented focus of coordinated action across all relevant US Government agencies to mitigate these risks.”
The US would not be the first country with a digital currency. China has introduced its own CBDC, with more than 140 million people having opened digital “wallets,” and many other countries have either rolled out or are developing digital currencies.
The Bahamas’ Sand Dollar is considered among the world’s most successful digital currencies.
The move by the Biden administration pointed to what he believes is a certain inevitability of the broader move toward digital currencies.
While the administration fact sheet did not provide any details about how a US digital currency might work, it is suggested that the functionality could be reasonably simple, with transactions flowing directly to and from the Fed, sidestepping banks and payment systems and creating near-seamless flows of cash.
Tags cash CBDC China competition crypto assets Cryptocurrencies Digital US Dollar executive order FED
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