Digital dollar coming? Biden signs exec order to study CBDC
- A US central bank digital currency (CBDC) could be incoming, as President Biden signed an executive order as a sign of support.
- The measures focus on six key areas: consumer protection, financial stability, illicit activity, US competitiveness, financial inclusion and responsible innovation.
- The order requests SEC and Consumer Financial Protection Bureau reports, among others, to assess issues raised by volatile cryptocurrencies
A year ago, as China continued being a frontrunner in the global race towards digital currency, US officials realized that it is about time for them to also pursue a central bank digital currency (CBDC) plan. US Federal Reserve Chair Jerome Powell broke new ground, calling the digital dollar “a high priority project for the US.”
Powell at the time emphasized that the preconditions for a so-called digital dollar will take significant time to achieve. “There is a great deal of work yet to be done,” Powell said. One year later, President Joe Biden signed an executive order instructing his government to assess the risks and benefits of creating a central bank digital dollar, as well as other cryptocurrency topics.
“My Administration places the highest urgency on research and development efforts into the potential design and deployment options of a US CBDC,” the executive order reads. The order also requires the Treasury Department, the Commerce Department and other key agencies to prepare reports on “the future of money” and the role cryptocurrencies will play.
A separate fact sheet released by the White House stated that the executive order will also 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. The sheet highlighted that the Order lays out a national policy for digital assets across six key priorities.
The priorities include consumer and investor protection, financial stability, responsible innovation, economic competitiveness, and US leadership in the global financial system; and. In the same fact sheet, the Biden 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.”
A year ago in March 2021, the Federal Reserve published a paper exploring preconditions for a retail central bank digital currency. Then again in January this year, the Fed published a white paper 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.
To be precise, Biden didn’t exactly imply whether the US should launch its own digital dollar. Rather, he’s calling on his own government to place “urgency” on the research and development of a potential CBDC. According to the White House, digital assets, including cryptocurrencies, have seen explosive growth in recent years, surpassing a US$3 trillion market cap last November and up from US$14 billion just five years prior.
“The Administration will continue work across agencies and with Congress to establish policies that guard against risks and guide responsible innovation, with our allies and partners to develop aligned international capabilities that respond to national security risks, and with the private sector to study and support technological advances in digital assets,” the White House concluded.
According to the Atlantic Council, in total nine countries, with Nigeria the latest, have launched central bank digital currencies, while 16 others — including China — have begun the development of such digital assets. Overall, there are 87 countries in the process of exploring CBDCs, representing up to 90% of the global GDP.