By FATIMA HUSSEIN
Associated Press
WASHINGTON (AP) -- 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 U.S. role as a leader in the world financial system.
The White House said on 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.
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 nonpartisan think tank, 105 countries representing more than 95% of global gross domestic product already are exploring or have created a central bank digital currency.
The council found that the U.S. and the U.K. are far behind in creating a digital dollar or its equivalent.
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 will come out in the next weeks and months.
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."
On Capitol Hill, lawmakers have submitted various pieces of legislation to regulate cryptocurrency and other digital assets.
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."