Biden orders government to study digital dollar, other cryptocurrency risks

Representations of virtual cryptocurrencies are placed on US dollar bills in this illustration taken on November 28, 2021. REUTERS/Dado Ruvic/Illustration

WASHINGTON, March 9 (Reuters) - U.S. President Joe Biden on Wednesday signed an executive order requiring the government to assess the risks and benefits of creating a central bank digital dollar, as well as other issues related to cryptocurrencies. the White House said.

Bitcoin broke into the news as the administration's holistic and deliberative approach calmed market fears of an immediate regulatory crackdown on cryptocurrencies. In midday trading, bitcoin was up 9.1% at $42,280, on track for its biggest percentage gain since Feb. 28. Read more

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 cryptocurrencies will play.

Wide-ranging oversight of the cryptocurrency market, which topped $3 trillion in November, is essential to ensuring the national security, financial stability and competitiveness of the US, and staving off the growing threat of cybercrime, they said. administration officials.

Analysts see the long-awaited executive order as a clear recognition of the growing importance of cryptocurrencies and its potential consequences for the US and global financial systems. Read more

"The growth of cryptocurrencies has been explosive," Daleep Singh, deputy economic and national security adviser, said in an interview with CNN.

Cryptocurrencies and digital assets can affect the way people access banking, if consumers are safe and secure from the volatility and primacy of the US dollar in the global economy, he said.

The executive order is part of an effort to promote responsible innovation but mitigates risk to consumers, investors and businesses, Brian Deese, director of the National Economic Council, and Jake Sullivan, national security adviser at the House, said in a statement. White.

"We are mindful that the 'financial innovation' of the past has too often failed to benefit working families, while exacerbating inequality and increasing systemic financial risk," they said.

A key goal is to fix inefficiencies in the current US payment system and boost financial inclusion, especially of poor Americans, of whom about 5% currently don't have bank accounts due to high fees, said a official.

Another key measure directs the government to assess the technological infrastructure needed for a possible US Central Bank Digital Currency (CBDC) – an electronic version of dollar bills in your pocket.

But it could take years to develop and introduce a "digital dollar," administration officials warned Wednesday, noting that the Federal Reserve in January had referred the issue to Congress. Read more

Administration officials said the United States was taking great care in deciding 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 deliberate about that analysis because the implications of our move in this direction are profound for the country that issues the world's main reserve currency," one of the officials said.

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

Nine countries have launched central bank digital currencies and another 16, including China, have started developing such digital assets, according to the Atlantic Councilleading some in Washington to worry that the dollar could lose some of its dominance to China.

The US dollar remains supported by key fundamentals, 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 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," the official said.

Asked whether China could develop a competitive advantage if it acted sooner, an administration official said US officials would monitor developments with a view to maintaining the dollar's centrality in the global economy.

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

A key goal is to fix inefficiencies in the current US payment system and boost financial inclusion, especially of poor Americans, of whom about 5% don't have bank accounts due to high fees, an official said. .

Information from Andrea Shalal and Katanga Johnson; Additional reporting by Doina Chiacu; Edited by Michelle Price, Simon Cameron-Moore and Mark Porter

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