If It Serves The National Interest, The US Treasury Will Advise On Issuing Digital Currency: Source
As a response to President Joe Biden’s executive order on cryptocurrencies, the Treasury Department will give advice on how to move forward with a CBDC. This could be its most important idea.
According to a person familiar with a report that will be released soon, the U.S. Treasury Department will advise the federal government to move forward with work to issue a digital dollar, but it should only take the final step if there is sign-off that the government-created tokens are in the “national interest.”
The individual, who asked to remain anonymous because the Treasury’s “Future of Money” report hasn’t been made public, said the issue of national interest will depend on further Biden administration clearance and-potentially-action by Congress. The question of whether U.S. legislators must adopt a statute authorising the Federal Reserve to develop a central bank digital currency (CBDC), which may be resolved soon in a different examination, makes this national-interest decision murkier.
Many of the studies required by President Joe Biden’s executive order—which requested recommendations on crypto from various federal agencies—have now been submitted. The Treasury’s guidance on the issue of a digital dollar is one of the most-anticipated documents. This is because the release of such a token could completely change the landscape of digital assets and have a big effect on how people interact with traditional banks.
A Treasury Department spokeswoman declined to respond to questions about the report.
The Fed board will ultimately decide whether to issue a CBDC, and Chair Jerome Powell and other top Fed officials have consistently emphasized that the central bank won’t act without backing from the government and Congress. So far, Republicans have made every attempt to get the Fed to respond, but so far they have been unsuccessful. The Fed has been cautious about specifying what legislative approval must look like.
When it releases its own cryptocurrency study, the Department of Justice may soon provide an answer as to whether the project needs the support of new legislation. Powell and the board will have to consider what kind of signal of support they need from Congress in the event that Justice rules that the president is the only one who can decide whether a CBDC is in the best interests of the nation.
The “Future of Money” paper will offer prospective ideas for how the digital dollar could be created, the source added, even though it won’t officially offer an administration endorsement. The work being done on a government real-time payments system, which is anticipated to launch next year, will also be highlighted. This may ease some of the pressure on the CBDC decision.
Even though some countries, like China, have moved forward with CBDCs, President Biden has not yet said if he would support the government issuing a token.
According to Fed vice Chair Lael Brainard, it might take up to five years to design and introduce a digital dollar, even if Biden, Congress, and the Fed ultimately decide to issue one. That would give the cryptocurrency sector a lot of time to make private stablecoins a viable user alternative. According to Fed officials, there would be space for the private sector to manage dollar-pegged cryptos in addition to a public token.
This year, when algorithmic terra USD (UST), one of the biggest stablecoins, crashed and negatively impacted the rest of the crypto infrastructure, the industry unintentionally added fuel to the CBDC fire. Since then, regulators and lawmakers have been upset with stablecoins, which are supposed to be the most stable part of the cryptocurrency market because they are tied to assets like the dollar.
CBDCs have also received recognition as a potential means of granting consumers who are unable to use banks financial access.
According to Rep. Maxine Waters (D-Calif.), the chairwoman of the House Financial Services Committee, “unlike private digital assets, a CBDC issued by the Federal Reserve would be backed by the full faith and credit of the U.S. government, like the dollar bills in our wallets,” in a statement earlier this year. She claimed that as more economic activity shifts online, a digital dollar “holds the prospect of extending financial inclusion for marginalized groups.”
Fed officials have reassured the rest of the financial industry that they will continue to manage their customers’ digital funds and that they will not have direct digital accounts with the central bank.
Biden’s executive order has so far resulted in three papers, one of which was released on Thursday and examined the environmental impact of cryptocurrency. That letter caused a stir since it demanded environmental standards for the sector and warned that if improvements weren’t made, crypto’s proof-of-work mining might be restricted or even outlawed.