Newsman: President Joe Biden signed Wednesday instructing the federal government to explore possible uses of and regulations for digital assets like cryptocurrencies. The move is part of a sweeping executive order.
“My Administration places the highest urgency on research and development efforts into the potential design and deployment options of a United States CBDC,” the executive order reads.
The order asks for a wide variety of agencies to begin research and submit reports on a variety of issues surrounding digital currencies, from design and security to financial and societal impacts.
“We know the implications of potentially issuing a digital dollar are profound. They’re extraordinarily wide-ranging,” a senior administration official told reporters on a call Tuesday.
Although a U.S. digital currency would not necessarily change much in terms of everyday experiences like buying goods and services, economists say it could transform central and commercial banking, as well as government sanctions, banking accessibility and taxes.
A U.S. digital currency could be on the horizon.
The Biden administration is putting its support behind the research and development of a “U.S. Central Bank Digital Currency,” or CBDC.
The Fed published a white paper in January about potentially creating a CBDC that would complement existing payment systems. It found that a CBDC could make payments cheaper and easier for consumers but might also pose a risk to the stability of the U.S. financial system.
In its fact sheet, the administration said it also would take steps to “mitigate the illicit finance and national security risks posed by the illicit use of digital assets by directing an unprecedented focus of coordinated action across all relevant U.S. Government agencies to mitigate these risks.”
A digital currency could make the kind of stimulus payments of the coronavirus .In addition to the consumer benefits, a U.S. digital currency would offer the Fed a new tool that economists have previously only theorized about: negative interest rates.
Controlling interest rates is the Fed’s primary way to stimulate or cool the economy — but it comes with limits. Banks can drop interest rates on regular money only so low, known as the zero bound, leaving central banks with few options when interest rates are already low and the economy needs a boost.
With a digital currency, the zero bound does not exist, allowing for aggressive action when needed.
The U.S. would not be the first country with a digital currency. China has introduced its own CBDC, with more than 140 million people having opened digital “wallets,” and many other countries have either rolled out or are developing digital currencies. The Bahamas’ Sand Dollar is considered among the world’s most successful digital currencies.
