US President Biden is pushing for a coordinated approach to crypto oversight as the United States risks losing ground to China.
US President Joe Biden will order government agencies to begin work on creating a digital US dollar.
Amid the explosive rise of private cryptocurrencies like bitcoin, the US effort will study benefits and potential risks while "placing urgency on research and development of a potential United States CBDC (Central Bank Digital Currency)," according to a White House statement on Wednesday.
US officials said Biden is set to sign an executive order requiring the government to assess the risks and benefits of creating a central bank digital dollar.
Biden's order will require the US Treasury Department, the Commerce Department and other key agencies to prepare reports on "the future of money" and the role cryptocurrencies will play.
Wide-ranging oversight of the cryptocurrency market, which surged past $3 trillion in November, is essential to ensure US national security, financial stability and US competitiveness, and stave off the growing threat of cyber crime, officials said.
Analysts view the long-awaited executive order, first reported on Monday, as a stark acknowledgement of the growing importance of cryptocurrencies and their potential consequences for the US and global financial systems.
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May take years
In January, the US Federal Reserve kicked the question of whether the United States should pursue a digital dollar to Congress, leading analysts to predict such a project would take years.
But one official said the United States would move forward with developing a digital dollar, albeit with care given the dollar's role as the world's primary reserve currency.
"We've got to be very, very deliberate about that analysis because the implications of our moving in this direction are profound for the country that issues the world's primary reserve currency," the official said.
The order also encourages the Federal Reserve to continue research and development efforts.
Nine countries have launched central bank digital currencies, and 16 others - including China - have begun development of such digital assets, according to the Atlantic Council, leading some in Washington to worry that the dollar could lose some of its dominance to China.
In addition, the order asks 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.
One key objective is to redress inefficiencies in the current US payments system and boost financial inclusion, especially of poor Americans about 5 percent of whom do not currently have bank accounts due to high fees, one official said.
"Before today, there hadn't previously been an organised effort to bring together the expertise and authorities of the entire US government to inform a holistic approach to digital assets," another official added.