The crypto-triggered evolution of Central Bank Digital Currency (CBDC) has come with a contagious wave that is catching up with economies across the globe.
On Friday, the White House indicated that the Biden’s administration is moving a step closer to developing a CBDC, a push it’s making to cement dollar’s leading role in the global financial system.
This came on the heels of China’s push for the adoption of its own digital currency eYuan.
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The White House said the US’ development of a digital currency took off in March after President Joe Biden issued an executive order 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.
Cryptocurrency, which is perceived as a threat to fiats, stirred the world’s consciousness on the need for a digital currency alternative – pushing the growing trend of countries creating a digital version of their fiats.
China’s move to create eYuan rattled the US as it was seen as a potential vehicle for the yuan to topple the US dollar in the global financial system, prompting Washington to launch a quick study on how to develop its own digital currency.
Part of the task given to agencies by the Biden’s administration is to create a policy framework for a potential digital currency.
Treasury Secretary Janet Yellen said one Treasury recommendation is that the U.S. “advance policy and technical work on a potential 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.
Apart from the US and China, other countries, including G7 members, are also developing policy frameworks for digital currencies or are already trialing it for adoption. Nigeria has already launched its own dubbed the eNaira.
The trend was noted by the Atlantic Council nonpartisan think tank, which said that 105 countries representing more than 95% of global gross domestic product already are exploring or have created a central bank digital currency.
However, the council found that the U.S. and the U.K. are far behind in creating a digital dollar or its equivalent.
The Biden’s administration’s policy framework has to be developed using reports from different agencies. The Treasury, the Justice Department, the Consumer Finance Protection Bureau, the 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 are expected to be out in the coming weeks and months.
However, several experts quoted by AP shared different opinions on the report, cryptocurrency and the US’ late move to develop a digital currency.
Eswar Prasad, a trade professor at Cornell who studies the digitization of currencies, said Treasury’s 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.
He said the report sets the stage for the creation of agency regulations and legislation “that can improve the benefit-risk tradeoff 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 reads, “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” she said, “we don’t see clear recommendations.”
The director of the National Economic Council, Brian Deese, 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,” he said, “prudent regulation of cryptocurrencies is needed.”
He said on Friday that the 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.”