The Biden administration is moving one step closer to developing a central bank digital currency, known as the digital dollar, saying it would help reinforce the United States' role as a leader in the world financial system.
The White House said Friday that after President Joe Biden issued an executive order in March calling on a variety of agencies to look at ways to regulate digital assets, the agencies came up with nine reports covering cryptocurrency impacts on financial markets, the environment, innovation and other elements of the economic system.
Treasury Secretary Janet Yellen said one Treasury recommendation is that the U.S. "advance policy and technical work on a potential central bank digital currency, or CBDC, so that the United States is prepared if CBDC is determined to be in the national interest."
"Right now, some aspects of our current payment system are too slow or too expensive," Yellen said on a Thursday call with reporters laying out some of the findings of the reports.
Central bank digital currencies differ from existing digital money available to the general public, such as the balance in a bank account, because they would be a direct liability of the Federal Reserve, not a commercial bank.
According to the Atlantic Council, a nonpartisan think tank, 105 countries representing more than 95% of global gross domestic product already are exploring or have created central bank digital currencies.
The council found that the U.S. and the United Kingdom are far behind in creating a digital currencies or an equivalent.
The U.S. Treasury and Justice departments, Consumer Finance Protection Bureau, Securities and Exchange Commission, and other agencies were tasked with contributing to reports that would address various concerns about the risks, development and usage of digital assets. Several reports will come out in the next weeks and months.
Eswar Prasad, a trade professor at Cornell University who studies the digitization of currencies, said the Treasury Department report "takes a positive view about how a digital dollar might play a useful role in increasing payment options for individuals and businesses" while acknowledging the risks of its development.
Prasad said the report sets the stage for the creation of agency regulations and legislation "that can improve the benefit-risk trade-off associated with cryptocurrencies and related technologies."
The Blockchain Association, which lobbies lawmakers on Capitol Hill, said in a statement that the White House reports are "a missed opportunity to cement U.S. crypto leadership."
"These reports focus on risks -- not opportunities," the statement said, "and omit substantive recommendations on how the United States can promote its burgeoning crypto industry, including job creation, improvements to the financial system, and expanded access for all Americans."
On Capitol Hill, lawmakers have submitted various pieces of legislation to regulate cryptocurrency and other digital assets.
Sheila Warren, CEO of the Crypto Council for Innovation, said in an emailed statement that the report "seem to kick the can down the road.
"We don't see clear recommendations," Warren said.
Brian Deese, director of the National Economic Council, told reporters that "we've seen in recent months substantial turmoil in cryptocurrency markets and these events really highlight how, without proper oversight, cryptocurrencies risk harming everyday Americans' financial stability and our national security."
"It is why this administration believes that now more than ever," Deese said, "prudent regulation of cryptocurrencies is needed."
He said Friday that the Biden administration plans to "execute a comprehensive action plan with priority steps to mitigate key risks of cryptocurrencies -- among others, money laundering and financing for terrorism."