President Joe Biden signed an executive order on Wednesday, requiring the Federal Reserve to make a risk-benefit assessment of creating the central bank’s own digital currency.
Following the surging popularity of bitcoin, Ethereum, and other cryptocurrencies, Biden urged federal agencies to examine the role of digital assets in national security, as well as in economic growth and stability,
The order recognizes the importance of cryptocurrency and innovation in today’s global financial system, specifically looking at how digital asset development can ensure that such innovation equally benefits all Americans across their financial status and wealth.
“The approach outlined in the E.O. will reinforce U.S. leadership in the global financial system and safeguard the long-term efficacy of critical national security tools like sanctions and anti-money laundering frameworks,” the statement by NEC Director Brian Deese and National Security Advisor Jake Sullivan relating to the new order suggests.
The statement also outlines the order to be “the first-ever comprehensive federal digital assets strategy for the United States.”
Regulating cryptocurrency on a state level, however, will come with its risks. Currently, $11,5 billion worth of crypto assets is associated with criminal activity, and while there is a pretty decent understanding of what’s happening on a macro level, tracking individual activities is often impossible.
The order also reviews the technical requirements for a US Central Bank Digital Currency – known as a “digital dollar,” which will mimic the electronic version of a banknote. But considering the dollar being the main reserve currency and its role in the stability of the international monetary system, the administration is being very cautious in proceeding with digitizing it.
“It could take years to develop and introduce a digital dollar," administration officials warned on Wednesday, according to Reuters.
The order comes after increased worries over Russia’s potential attempts to evade sanctions through cryptocurrency. The government is also working on developing its own “digital ruble,” which could potentially allow them to avoid trading in dollars completely. According to Emily Flitter and David Yaffe-Bellany writing for The New York Times, Russia could also employ hackers to steal digital currencies and make up for lost assets.
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