Biden will order research on digital dollar and cryptocurrencies

U.S. President Joe Biden will sign an executive order on Wednesday asking the government to assess the risks and benefits of creating a central bank digital dollar, among other cryptocurrency issues, U.S. government officials said.

U.S. government officials say broad regulation of the cryptocurrency market is critical to ensuring U.S. national security, financial stability and U.S. competitiveness, and staving off the growing threat of cybercrime. In November last year, the total market capitalization of the cryptocurrency market exceeded $3 trillion for the first time.

In January, the Federal Reserve released a digital currency white paper that explored the pros and cons of issuing a digital dollar, but has yet to draw any conclusions on whether it should launch a digital dollar. "A digital dollar could fundamentally change the structure of the U.S. financial system, changing the roles and responsibilities of the private sector and the Federal Reserve," the report said. Analysts predicted at the time that such a plan would take years.

But the U.S. will move forward with a digital dollar, one official said, albeit with caution given the dollar’s role as the world’s main reserve currency.

Additionally, the executive order requires agencies including the Securities and Exchange Commission and the Consumer Financial Protection Bureau to review other issues raised by cryptocurrencies, including systemic risk and consumer protection.

A key goal is to improve inefficiencies in the current U.S. payment system and promote financial inclusion, one official said. About 5% of poor Americans are currently unbanked due to high fees.