President Joe Biden on Wednesday signed an executive order that calls on his government to study the possibility of issuing a U.S. central bank digital currency through an assessment of the risks and benefits of doing so.
The announcement comes as over 100 countries are exploring or piloting central bank digital currencies, with China seen to be moving ahead among major economies in the global race to launch the digital form of a country’s sovereign currency.
In the executive order, Biden laid out key priorities in dealing with digital assets, such as consumer and investor protection, financial stability, mitigation of illicit finance through digital assets and promotion of U.S. leadership in the global financial system.
The Treasury Department and other agencies will develop policy recommendations to address the implications of the growing digital asset sector and changes in financial markets such as for consumers and businesses, with an eye toward equitable economic growth, according to the White House.
The order also encourages the Federal Reserve to continue its research for a central bank digital currency, including development of a plan for government action in support of its work, and seeks U.S. participation in multi-country experimentation.
The efforts are intended to ensure “U.S. leadership internationally to promote CBDC development that is consistent with U.S. priorities and democratic values,” the White House said.
In January, the U.S. central bank said it is taking the “first step” in discussions about issuing its own digital currency, as it released a report saying potential benefits would include helping preserve the dominant international role of the dollar.
The report, the first of its kind by the Fed, did not draw a conclusion on launching a central bank digital currency but instead focused on the pros and cons of issuing one.
China has already been piloting the use of the digital yuan, raising concerns among some experts in the United States that a central bank digital currency by the world’s second-largest economy may eventually undermine the dominance of the dollar.
A senior Biden administration official said the dollar’s role “has been and will continue to be crucial to the stability of the international monetary system as a whole.”
“Foreign central bank digital currencies and their introduction by themselves do not threaten this dominance,” he said, while adding that the U.S. government is constantly monitoring any development that may affect the centrality of the dollar in the global economy.
According to the White House, digital assets including cryptocurrencies have seen explosive growth in recent years, surpassing a $3 trillion market cap last November, up from $14 billion just five years prior.
