The White House announced that U.S. President Joe Biden issued an executive order Wednesday asking the government to evaluate the risks and benefits associated with creating a central digital currency.
Bitcoin surged as news broke that the administration’s holistic approach and deliberate approach to calming market fears about a regulatory crackdown on cryptocurrency trading. Midday trading saw bitcoin rise 9.1% to $42,280. This is the largest percentage gain since February 28th.
Biden’s order requires the Commerce Department, Treasury Department and other key agencies prepare reports about “the future money” and how cryptocurrencies will be used.
Officials from the administration stated that a broad oversight of the cryptocurrency market is necessary to protect the U.S. financial stability, national security and competitiveness and prevent the rising threat of cybercrime.
Analysts see the long-awaited executive orders as a clear acknowledgement of the increasing importance of cryptocurrencies, and the potential consequences for the U.S. financial system and global financial markets.
In an interview with CNN, Daleep Singh (deputy national security advisor for economics) stated that “the growth in cryptocurrency has been explosive.”
He said that cryptocurrencies and digital currencies can impact how people access banking and whether they are protected from volatility and preserve the U.S. Dollar’s primacy in the global economy.
This executive order is part a plan to encourage responsible innovation and to mitigate the risk to investors, consumers and businesses, Brian Deese (director of the National Economic Council) and Jake Sullivan (White House national security adviser) said in a statement.
They stated that they were clear that “financial innovations” of the past have too often failed to benefit working families and increased inequality, as well as increasing financial risk.
One official stated that one of the key objectives is to improve financial inclusion and reduce inefficiencies in the U.S. payment system.
Another important measure is to direct the government’s assessment of the technological infrastructure required for the U.S. Central Bank Digital Currency. (CBDC) A digital version of your dollar bills, it can be used as a form of currency.
Officials from the administration cautioned that it could take many years to create and introduce a digital dollar. They also noted that the Federal Reserve had in January referred the issue before Congress.
Officials from the Administration said that the United States was considering whether and how to develop a digital currency, as the dollar is the world’s primary reserve currency.
One official said that “We have to be very, very deliberate about this analysis because the implications for the country that issues world’s primary reserves currency are profound.”
The Federal Reserve is encouraged to continue its research and development efforts by the order.
According to the Atlantic Council, nine countries have created digital currencies for their central banks. 16 other countries, including China, have also begun developing digital assets. This has led some to fear that the dollar might lose some of its power over China.
According to the official, the U.S. Dollar is still based on key fundamentals such as transparency, rule of law, and full independence of Federal Reserve.
“The role of the dollar has been and will remain crucial to the stability the international monetary system in its entirety. The official stated that the dominance of digital currencies from foreign central banks and their introduction are not in danger.
When asked if China could gain a competitive advantage if they move sooner, a senior administration official stated that the U.S. would closely monitor developments in order to maintain the dollar’s centrality in the global economy.
To assess the issues raised by cryptocurrency, including systemic risks and consumer protection, the order requests more than a dozen reports from the Securities and Exchange Commission and Consumer Financial Protection Bureau.
An official stated that one of the key objectives is to improve financial inclusion and reduce inefficiencies in the U.S. payment system.
Chief of Blockchain Intelligence Group, Lance Morginn, said that the order was shortsighted because it replaced an industry request for a wider U.S. embrace on crypto with more analysis, reporting, and reporting.
Morginn stated that “We are at a pivotal moment in history where we are watching how digital resources are used in nation-building, and how digital assets create transparency into financial transactions unlike anything seen before.”
“If the U.S. government takes longer to adopt policies regarding digital assets, the industry runs the risk of moving to other financial capitals which are prioritizing Blockchain technology.”
Chairs of the financial regulatory agencies including the CFPB, the SEC and other regulators welcomed the move and stated that they would fully comply.