According to the White House, US President Joe Biden signed an executive order on Wednesday for the creation of digital dollar directing the government to evaluate the risks and benefits of developing a central bank digital currency, as well as other cryptocurrency concerns.
The administration’s holistic and methodical approach soothed market fears of an imminent governmental crackdown on cryptocurrencies, and Bitcoin soared as a result of the news. Bitcoin climbed 9.1% to $42,280 in noon trading, putting it on course for its biggest percentage rise since February 28.
The Treasury Department, the Commerce Department, and other important departments will be required by Biden’s directive to submit reports on “the future of money” and the role that cryptocurrencies will play.
Wide-ranging oversight of the cryptocurrency market, which surpassed $3 trillion in November, is critical to ensuring national security, financial stability, and competitiveness in the United States, as well as fending off the growing threat of cyber crime, according to administration officials.
Analysts see the long-awaited executive order as a clear recognition of cryptocurrencies’ growing importance and potential ramifications for the US and worldwide financial institutions.
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In an interview with CNN, Daleep Singh, the deputy national security adviser for economics, remarked “the growth in cryptocurrencies has been explosive.”
Cryptocurrencies and digital assets, he argued, can influence how people access banking, whether consumers are safe and protected from volatility, and the dollar’s primacy in the global economy.
According to Brian Deese, head of the National Economic Council, and Jake Sullivan, White House national security adviser, the executive order is part of an attempt to foster responsible innovation while minimizing the risk to consumers, investors, and businesses.
“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 significant goal is to address inefficiencies in the present U.S. payments system and increase financial inclusion, particularly among the poor, who make for around 5% of the population but do not have bank accounts due to exorbitant fees, according to one official.
Another important provision urges the government to study the technological infrastructure required for a prospective US Central Bank Digital Currency (CBDC), which would be an electronic counterpart of the dollar bills in your wallet.
However, administration officials cautioned on Wednesday that developing and introducing a “digital dollar” may take years, noting that the Federal Reserve had brought the topic to Congress in January.
Given the dollar’s importance as the world’s principal reserve currency, administration officials said the US was taking great care in deciding whether – and how – to move forward with building a digital dollar.
One of the officials noted “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 order also encourages the Federal Reserve to keep investing in research and development.
According to the Atlantic Council, nine countries have established central bank digital currencies, and 16 more – including China – have begun developing such digital assets, prompting some in Washington to fear that the dollar could lose part of its dominance to China.
The source stated that crucial foundations such as a commitment to openness, the rule of law, and the Federal Reserve’s full independence continue to underpin the US currency.
“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 official said.
When asked if moving sooner would give China a competitive edge, one administration official said the US will keep an eye on developments to ensure the dollar’s centrality in the global economy.
The order requests more than a dozen reports, including those from the Securities and Exchange Commission and the Consumer Financial Protection Bureau, to evaluate issues brought by cryptocurrencies, such as systemic risk and consumer protection.
The order, according to industry experts such as Lance Morginn, CEO of Blockchain Intelligence Group, is shortsighted since it replaces business requests for a more broad US adoption of crypto with more investigation and reporting.
“We’re at a pivotal time in history where the world is watching how digital assets are being used in nation-building and how digital assets are creating transparency into financial transactions like never seen before,” Morginn said.
“If the U.S. government takes too long to adopt policies toward digital assets, they run the risk of the industry moving to other financial capitals that are prioritizing blockchain technology.”
Financial regulatory agency chairs, such as the CFPB and the SEC, applauded the initiative and stated that they would totally comply.