Joe Biden signed an executive order on Wednesday instructing the federal government to move ahead with the development of entirely digital US dollars.
The order also directs attention to other issues related to private cryptocurrencies. The order primarily focuses on moving the Treasury and Commerce Departments forward with studies of “the future of money” in “central bank digital currencies” (CBDCs). The federal agencies are instructed to prepare reports analyzing the roles played by all cryptocurrencies in the global economy.
A White House statement said that “wide-ranging oversight” of the cryptocurrency market is essential to national security, the stability of US financial markets, and combating the increasing threat of cybercrime. The international cryptocurrency marketplace grew past $3 trillion last November.
Financial experts see the executive order as a signal that the federal government prioritizes the growth of cryptocurrencies and associated risks posed to international financial systems.
The order, which calls for a report on the infrastructure needed to implement a US CBDC, follows a congressional address in January by the Federal Reserve regarding the propriety of a federal cryptocurrency.
The Fed report, titled “Money and Payments: The US Dollar in the Age of Digital Transformation,” discussed the role of digital currencies like CBDCs and Bitcoin and digital payment processing companies in the near-term future of the American economy. The report concluded that a CBDC could provide a safe payment option for consumers and businesses and improve the efficiency of international transactions.
However, the Fed also pointed out some possible downsides. One problem area is the already growing amount of fraudulent activity using digital currencies. Another concern is the volatility of digital currencies and the amount of work necessary to accommodate a nationwide digital financial system.
In the report, Fed Chair Jerome Powell said the central bank is optimistic about engaging with lawmakers, government officials and the public further to examine the pros and cons of an American CBDC.
Nine countries worldwide have already implemented CBDCs, while China and several others have started pilot programs to develop government cryptocurrencies.