U.S. President Joe Biden will sign an executive order on Wednesday requiring the government to assess the risks and benefits of creating a central bank digital dollar, as well as other cryptocurrency issues, administration officials said.
Biden's order will require the Treasury Department, the 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 surged past $3 trillion in November, is essential to ensure U.S. national security, financial stability and U.S. competitiveness, and stave off the growing threat of cybercrime, officials said.
Analysts view the long-awaited executive order, first reported on Monday, as a stark acknowledgement of the growing importance of cryptocurrencies and their potential consequences for the U.S. and global financial systems.
One of its key measures directs the U.S. Government to assess the technological infrastructure needed for a potential U.S. Central Bank Digital Currency (CBDC) -- an electronic version of dollar bills in your pocket.
In January, the U.S. Federal Reserve kicked the question of whether the United States should pursue a digital dollar to Congress, leading analysts to predict such a project would take years.
But one official said the United States would move forward with developing a digital dollar, albeit with care given the dollar's role as the world's primary reserve currency.
"We've got to be very, very deliberate about that analysis because the implications of our moving in this direction are profound for the country that issues the world's primary reserve currency," the official said.
The order also encourages the Federal Reserve to continue research and development efforts.
Nine countries have launched central bank digital currencies, and 16 others - including China - have begun development of such digital assets, according to the Atlantic Council, leading some in Washington to worry that the dollar could lose some of its dominance to China.
The U.S. dollar remains underpinned by key fundamentals, including a commitment to transparency, the rule of law and the full independence of the Federal Reserve, the 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."
The United States will monitor developments with an eye to maintaining the centrality of the dollar in the global economy, the official said.
In addition, the order asks agencies, including the Securities and Exchange Commission and the Consumer Financial Protection Bureau, to review other issues raised by cryptocurrencies, including systemic risk and consumer protection.
One key objective is to redress inefficiencies in the current U.S. payments system and boost financial inclusion, especially of poor Americans about 5% of whom do not currently have bank accounts due to high fees, one official said. "Before today, there hadn't previously been an organized effort to bring together the expertise and authorities of the entire U.S. government to inform a holistic approach to digital assets," another official added.
