Biden Instructs The Government To Study The Digital Dollar And Other Cryptocurrency Risks

WASHINGTON, March 9 – US President Joe Biden signed an executive order on Wednesday requiring the government to assess the risks and benefits of creating a digital dollar central bank, as well as other cryptocurrency issues, the White House said.

Bitcoin surged on the news as the administration’s holistic and measured approach assuaged market fears of an immediate regulatory crackdown on cryptocurrencies. In midday trading, Bitcoin rose 9.1% to $42,280, the biggest percentage gain since February 28.

Biden’s order will require the Treasury Department, Commerce Department and other key agencies to prepare reports on the “future of money” and the role that cryptocurrencies will play.

Administration officials said wide-ranging oversight of the crypto market, which topped $3 trillion in November, is needed to ensure US national security, US financial stability and competitiveness, and to stave off the growing threat of cybercrime.

Analysts see the long-awaited executive order as a stark recognition of the growing importance of cryptocurrencies and their potential implications for the US and global financial systems. More

“The growth of cryptocurrency has been explosive,” said Duleep Singh, deputy national security adviser for economics, in an interview with CNN.

According to him, cryptocurrencies and digital assets can affect how people access banking services, whether consumers are protected from volatility, as well as the primacy of the US dollar in the global economy.

The order is part of an effort to promote responsible innovation but reduces risks for consumers, investors and businesses, National Economic Council Director Brian Deese and White House National Security Adviser Jake Sullivan said in a statement.

“We clearly understand that the ‘financial innovations’ of the past have too often failed to benefit working families, exacerbating inequalities and increasing systemic financial risk,” they said.

One of the key challenges, one official said, is to fix the inefficiencies in the current U.S. payment system and increase access to financial services, especially for poor Americans, about 5% of whom are currently unbanked due to high fees.

Another key measure is directing the government to assess the technology infrastructure needed for a potential US Central Bank Digital Currency (CBDC) — an electronic version of dollar bills in your pocket.

But it could take years to develop and deploy a “digital dollar,” administration officials warned Wednesday, noting that the Federal Reserve took the matter to Congress in January. More

Administration officials said the United States is considering very carefully whether and how to move forward with the development of a digital dollar, given the dollar’s role as the world’s main reserve currency.

“We have to be very, very careful in this analysis, because the consequences of our movement in this direction are very important for the country that issues the world’s main reserve currency,” one official said.

The order also urges the Federal Reserve to continue research and development.

Nine countries have launched central bank digital currencies and 16 others, including China, have begun developing such digital assets, according to the Atlantic Council, leading some in Washington to fear the dollar could cede some of its dominance to China.

The US dollar continues to be supported by key principles, including a commitment to transparency, the rule of law and the full independence of the Federal Reserve, the official said.

“The role of the dollar has been and will be of decisive importance for the stability of the international monetary system as a whole. Foreign central bank digital currencies and their introduction do not in themselves threaten this dominance,” the official said.

Asked if China could gain a competitive advantage if it did so sooner, one administration official said US officials would be monitoring developments to maintain the dollar’s central role in the global economy.

The order calls for more than a dozen reports, including from the Securities and Exchange Commission and the Consumer Financial Protection Bureau, to assess issues arising from cryptocurrencies, including systemic risk and consumer protection.

One of the key challenges, the official said, is to address inefficiencies in the current U.S. payment system and increase access to financial services, especially for poor Americans, about 5% of whom are currently unbanked due to high fees.

Reporting by Andrea Shalal and Katangi Johnson; Additional report by Doina Chiaku; Edited by Michelle Price, Simon Cameron-Moore and Mark Porter

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