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The U.S. Government to Delve into Digital Dollar and Cryptocurrency Risks

The world’s reserve currency may be about to go digital.

The world’s reserve currency may be about to go digital.

On March 9, the White House required the government to research several crypto-related topics, including the pros and cons of creating a central bank digital dollar. The Treasury Department, the Commerce Department, and other key agencies are to prepare reports on “the future of money” and what role cryptocurrencies will play.

One key objective of the U.S. dollar going digital is to redress inefficiencies in the current payments system and boost financial inclusion, especially of poor Americans, about 5% of whom do not currently have bank accounts due to high fees. Another key measure directs the government to assess the technological infrastructure needed for a potential U.S. Central Bank Digital Currency (CBDC) — an electronic version of dollar bills in your pocket.

Digital payments are already a big part of everyday transactions, from Apple Pay to debit cards, bank transfers, and payment services. At first glance, a digital dollar is just another way to receive and keep the money. At the same time, the mechanism that forms the basis of the digital currency would change.

The main challenge for governments considering digital currencies is whether they can develop the technology needed to make them work as seamlessly as the traditional banking sector. Moreover, the development of a digital dollar will resurface a long-standing debate in America over whether certain services should be private or public.

Despite the new guidance from the White House, however, a U.S. central bank currency won’t be implemented anytime soon. The process is likely to prove lengthy, with questions about whether it will offer the efficiency and ease of the current financial system. What’s more, the move would potentially give the government access to financial data that critics say could infringe on users’ privacy. It could take years to develop and introduce a digital dollar, administration officials cautioned.