The Biden administration is taking a step closer to developing a central bank digital currency, known as the digital dollar, saying it would help strengthen the role of the United States as a leader in the global financial system.
The White House said Friday that after President Joe Biden issued an executive order in March calling on various agencies to seek ways to regulate digital assets, the agencies authored nine reports, covering the impacts of cryptocurrency on financial markets, environment, innovation and other elements of the economic system.
Treasury Secretary Janet Yellen said one of the Treasury’s recommendations was that the United States “advance policy and technical work on a possible central bank digital currency, or CBDC, so that the United States be ready if the CBDC is deemed to be in the national interest”.
“Right now, some aspects of our current payment system are too slow or too expensive,” Yellen said in a Thursday call with reporters outlining some of the reports’ findings.
Central bank digital currencies differ from existing digital currency available to the general public, such as a bank account balance, because they would be a direct responsibility of the Federal Reserve, not a commercial bank.
According to the nonpartisan Atlantic Council think tank, 105 countries representing more than 95% of the world’s gross domestic product are already exploring or have created a central bank digital currency.
The council found that the US and UK are far behind in creating a digital dollar or its equivalent.
The Treasury, Department of Justice, Consumer Finance Protection Bureau, Securities and Exchange Commission and other agencies were tasked with contributing to reports that would address various concerns about risk, development and use of assets digital. Several reports will be published in the weeks and months to come.
Eswar Prasad, a Cornell business professor who studies the digitalization of currencies, said the Treasury report “takes a positive view of how a digital dollar could play a useful role in increasing payment options for individuals. and businesses” while recognizing the risks of its development.
He said the report paves the way for the creation of regulations and agency laws “that can improve the benefit-risk trade-off associated with cryptocurrencies and related technologies.”
The Blockchain Association, which lobbies lawmakers on Capitol Hill, said in a statement that the reports from the White House are “a missed opportunity to cement American crypto leadership.”
“These reports focus on risks – not opportunities,” the statement said, “and omit substantive recommendations on how the United States can promote its burgeoning crypto industry, including job creation, improving the financial system and expanding access to all Americans.”
On Capitol Hill, lawmakers have submitted various pieces of legislation to regulate cryptocurrency and other digital assets.
Sheila Warren, CEO of the Crypto Council for Innovation, said in an emailed statement that the report “appears to kick the box on the road,” she said, “we don’t see any clear recommendations.”
National Economic Council Director Brian Deese told reporters that “we have seen significant turbulence in the cryptocurrency markets in recent months and these events really show how, without proper oversight, cryptocurrencies are at risk of harm the financial stability of everyday Americans and our national security.” .”
“That’s why this administration believes that now more than ever,” he said, “careful regulation of cryptocurrencies is needed.”
He said on Friday that the administration plans to “execute a comprehensive action plan with priority steps to mitigate key risks from cryptocurrencies – among others, money laundering and terrorist financing.”
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