White House Directs Agencies to Analyze Digital Currency, Avenues to Mitigate Risk
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President Biden signed an executive order (EO) Wednesday mandating federal agencies evaluate the risks and benefits of cryptocurrencies and establishing a Central Bank Digital Currency (CBDC). By implementing the directive, the White House intends to develop cryptocurrency infrastructure, which critics say could leave the country's sector behind the rest of the world and negatively impact U.S. national security.
An expansive oversight of the cryptocurrency market is essential for U.S. national security, financial stability and competitiveness, and to stave off the growing threat of cybercrime, senior administration officials explained during a teleconference on the EO.
“Innovation is central to America’s story and powers our economy, generating jobs and opportunities, creating and building new industries, and sustaining our global competitive edge and leadership,” stated a senior White House official, “This innovation is also a critical factor in ensuring the long-term strength of key national security tools, like sanctions and anti-money laundering frameworks as well as other strategic benefits we reap from the role of the United States in the global financial system.”
Among the EO’s key objectives are to enhance the efficiency of the U.S. payments system and to increase financial inclusion, particularly for low-income Americans—5 percent of whom do not have bank accounts due to high fees. Another crucial measure asks the government to examine the technological infrastructure needed for a possible U.S. CBDC or an electronic version of a dollar bill in your pocket.
According to the Atlantic Council, nine countries have launched a CBDC, and 16 others have begun developing such digital assets. This has led some in Washington to fear that the dollar's dominance is diminishing. According to the Federal Reserve, which discussed the matter before Congress earlier this year, it could take years to develop and introduce a digital dollar.
In accordance with the EO, the Treasury Department, the Commerce Department, and other key agencies must prepare reports on the digital currency industry which surpassed $3 trillion late last year. The departments must also prepare report on the future of money and the role of cryptocurrencies. A standard-setting process will be conducted with input from international players to ensure fairness and promote robust standards.
“President Biden has identified a bold and prudent path forward for a whole-of-government approach to encourage responsible innovation in digital assets, including cryptocurrencies, stablecoins, and central bank digital currencies,” said Commerce Secretary Gina Raimondo.
A statement from Treasury Secretary Janet Yellen was initially published one day before the official executive order in an error, was taken down soon after, and has since been re-posted online. Sharing early insights into the details of the executive order, Secretary Yellen stated the directive would address risks associated with illicit finance and prevents threats to the financial system and the broader economy.
Treasury will also consult with the Financial Stability Oversight Council to ensure that appropriate safeguards are in place, in addition to ongoing coordination with the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC).
As Secretary Yellen noted, the Department is continuing to seek advice from investor protection groups and other experts.
“Treasury will work to promote a fairer, more inclusive, and more efficient financial system, while building on our ongoing work to counter illicit finance, and prevent risks to financial stability and national security,” Secretary Yellen confirmed.
Brian Deese, Director of the National Economic Council, and Jake Sullivan, White House National Security Adviser, promised to mitigate risk to consumers, investors and businesses, as the executive order promotes responsible innovation.
Cameron Winklevoss, co-founder of cryptocurrency exchange Gemini, described the order as a constructive step toward thoughtful regulation. Reaction from other prominent members of the cryptocurrency industry, however, felt the order was lacking in substance and aimed to serve American soft power abroad.