Biden Orders Study Of Digital Dollar, Crypto Coins

US President Joe Biden signed an executive order on Wednesday requiring his government to assess the risks and benefits of creating a central bank digital dollar, as well as other issues relating to cryptocurrencies.

Bitcoin surged on the news as the administration's deliberative approach calmed market fears about an immediate regulatory crackdown on cryptocurrencies. In midday trading, bitcoin rose 9.1 percent to US$42,280, on track for its largest percentage gain since February 28.

Biden's order will require the Treasury Department, the Commerce Department and other key US 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 US$3 trillion in November, is essential to ensuring US national security, financial stability and competitiveness, and to staving off the growing threat of cyber crime, administration officials said.

Analysts view the long-awaited executive order as a stark acknowledgement of the growing importance of cryptocurrencies and their potential consequences for the US and global financial systems.

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

Cryptocurrencies and digital assets can affect how people access banking, whether consumers are safe and protected from volatility, and the 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 the risk to consumers, investors and businesses, Brian Deese, director of the National Economic Council, and Jake Sullivan, White House national security adviser, said in a statement.

“We are clear-eyed that ‘financial innovation’ of the past has too often not benefited working families, while exacerbating inequality and increasing systemic financial risk,” they said.

One key objective is to redress inefficiencies in the current US payments system and boost financial inclusion, especially of poor Americans, about 5 percent of whom do not currently have bank accounts due to high fees, one official said.

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

However, it could take years to develop and introduce a "digital dollar," administration officials cautioned, noting that the Federal Reserve in January had referred the issue to Congress.

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.

Asked whether China could develop a competitive advantage if it moved sooner, one administration official said US officials would monitor developments with an eye to maintaining the centrality of the dollar in the global economy. (Reuters)