Biden's 'Digital Dollar': Could This Be the US' Answer to Bitcoin?

 What the president's executive order means for the future of cryptocurrency.

Could the US be on its way to creating its own "digital dollar" or cryptocurrency? The question has been on a lot of Americans' minds since President Joe Biden issued an executive order on digital assets.

 The March 9 order directed government agencies to investigate the risk that cryptocurrency poses to consumers, investors and financial markets, and to develop policy solutions to address those issues.

Biden's order also called on the Treasury Department to look into creating a government-controlled digital currency.  

This is the first time the government has formally addressed cryptocurrency -- a market now valued at approximately $1.7 trillion -- pointing both to the industry's growing influence and the Biden administration's awareness of its importance. 

Here's what to know about Biden's executive order, including what it entails, why it was issued and what it could mean for cryptocurrency regulation.

What is the executive order on digital assets about?

The March 9 order, described as "the first whole-of-government strategy to protect consumers, financial stability, national security, and address [the] climate risks" of digital assets, focuses on six areas: consumer and investor protection, financial stability, illicit activity, US competitiveness, inclusion and accessibility, and responsible development.

It directs the departments of Treasury, Commerce and Justice, the Federal Reserve, the Office of Science and Technology Policy and other government agencies to research crypto's risks and rewards.

"The executive order should be thought of more as a call to action than as a specific game plan," writes Aaron Klein, an economist with the Brookings Institute. 

"Broadly speaking, the White House is seeking to strike the right balance from the positives of crypto -- financial efficiency, inclusion, American leadership in global finance -- with its negatives: potential illicit financing, consumer and business abuse, and regulatory arbitrage."

While Biden's order doesn't announce any new regulations, it hints they're likely on the way.

Will the US create its own cryptocurrency? Biden tasked the Department of the Treasury with determining whether it would be feasible to issue a US-backed central banking digital currency, also known as a CBDC, similar to ones that China, Sweden, the EU and other governments are working on.

The Federal Reserve began its own four-month investigation into the possibility of a "digital dollar" back in January. 

"It's just very hard for me to imagine that the US, given the status of the dollar as a dominant currency in international payments, wouldn't come to the table in that circumstance with a similar kind of an offering," Fed governor Lael Brainard told the National Association of Business Economics last year, The Wall Street Journal reported.

But many officials, Republican and Democrat, are ambivalent about a Fed digital dollar. 

On the one hand, it could make it easier for the government to distribute financial aid to people who lack bank accounts. But, unlike cash, it could also allow the US central bank to see what citizens spent it on, raising privacy concerns.

Why did Biden issue the order? Some 40 million American adults, or 16% of the population, have used, traded or invested in cryptocurrencies, according to the Pew Research Center.

The White House is eager to shore up oversight of something that involves such a large sector and, according to the order, "safeguard against any systemic financial risks posed by digital assets."

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