What is a digital dollar? According to the Federal Reserve, a Central Bank Digital Currency is “typically defined as a central bank’s digital obligation that is readily available to the general public.” In contrast to the two current types of US federal reserve money: physical currency printed by the Fed and commercial banks’ digital balances at the Fed, a Federal Reserve FAQ said.
A digital currency issued by the US government, according to Biden’s order, might be used to “support efficient and low-cost transactions, particularly for cross-border funds transfers and payments, and to promote increased access to the financial system, with reduced risks posed by private sector-administered digital assets such as bitcoin and other cryptocurrencies”. There are “potential risks and drawbacks to consider,” and Biden ordered federal agencies to produce a study evaluating the consequences within six months. The White House stated that over 100 different nations have already “explored or piloting” CBDCs (Central Bank Digital Currency).
Biden also ordered government agencies to develop policies for managing cryptocurrencies. “The rise in digital assets creates an opportunity to reinforce American leadership in the global financial system and at the technological frontier, but also has substantial implications for consumer protection, financial stability, national security, and climate risk,” the White House said. Biden’s order “encourages regulators to ensure sufficient oversight and safeguard against any systemic financial risks posed by digital assets.”
What are the consequences of issuing a digital dollar?
The Biden administration is reportedly preparing to create a digital version of the dollar that would be convertible into any other currency. According to unidentified officials, “the ramifications of issuing a virtual dollar are far-reaching.” However, they also said they intended to “maintain the primacy of the dollar in global financial markets and the global economy.”
The secretary of the Treasury, in coordination with the secretary of State, Attorney General, Secretary of Commerce, Secretary of Homeland Security, Director of the Office of Management and Budget, and Director of National Intelligence will produce the report ordered by Biden. The study aims to assess a digital currency’s economic, political, and social impacts.
Biden asked federal agencies how Congress would need to change legislation before the US government could produce a digital currency.
