Order provides advantages to current payments system without threat of money laundering, criminal activity, says law expert
US President Joe Biden’s executive order this week is a major step for the use of blockchain and payment systems, according to one expert.
“The Biden Administration has taken a major step in directing an ordered approach to consideration of the use of blockchain technology, central bank digital currency (CBDC) and related developments into the US and global payments system,” Joseph Lynyak III, a partner at the international law firm Dorsey & Whitney, told Anadolu Agency via email.
Biden signed an executive order to ensure responsible innovation in digital assets and cryptocurrencies, which outlined “the first ever, whole-of-government approach to addressing the risks and harnessing the potential benefits of digital assets and their underlying technology,” according to the White House.
“The Executive Order is a somber assessment of potential benefits of this technology, and orders numerous federal agencies to consider digital currency as possibly providing advantages to the current payments system but without continuing the threat that many digital currencies present for money laundering and related criminal activity,” said Lynyak, who is an expert in the US on financial regulatory reform.
The order laid out a national policy for digital assets in six areas: consumer and investor protection, financial stability, illicit finance, US leadership in the global financial system and economic competitiveness, financial inclusion and responsible innovation.
It also included exploring a CBDC by placing urgency on research and development, according to the White House.
US Treasury Secretary Janet Yellen also said Wednesday that the Treasury Department will partner with US agencies to write a report on the future of money and payment systems.
Around 16% of adult Americans, approximately 40 million people, have invested in, traded or used cryptocurrencies, according to the White House.
Global demand for Bitcoin and cryptocurrencies soared during the coronavirus pandemic, as blockchain technology offers an alternative payment system to fiat money, in addition to different technology projects and initiatives such as metaverse and non-fungible tokens, referred to as NFTs.
While Biden’s executive order may pave the way for a US digital currency, more than 100 countries are exploring or piloting CBDCs, a digital form of a country’s sovereign currency.
If realized, a CBDC in the US would be issued by the Federal Reserve and it would be equal in value to the dollar.
So far, there are only a handful of countries that have issued CBDCs, while El Salvador in September became the first country to adopt Bitcoin as legal tender.
The Bahamas’ digital currency, the Sand Dollar, was launched in October 2020,while Nigeria debuted the e-Naira, the same month, according to American think-tank, the Atlantic Council.
Antigua and Barbuda, Grenada, Saint Kitts and Nevis, Saint Lucia, Dominica, and Montserrat, which jointly operate the Eastern Caribbean Central Bank, have all adopted its DCash digital currency.
In China, after the government’s harsh regulations and heavy restrictions on cryptocurrencies and miners, the People’s Bank of China introduced in January digital yuan and an application that is available to users in 12 cities across the country.
China’s digital renminbi, also referred to as e-CNY, has become the first digital currency to be issued by a major economy in the world.
The European Central Bank last July launched a project to develop a digital euro, which could be introduced in two years.
Biden’s executive order comes at a time when central banks are exploring options and developing projects for digital currencies, and the US does not want to fall behind.
US Federal Reserve Chair Jerome Powell in late February called the digital dollar “a high priority project” after the Fed published a paper Feb. 24 titled “Preconditions for a general-purpose central bank digital currency.”