Digital Dollar Regulating Group To Be Led By US Treasury

A new senior-level working group that will shortly begin routine discussions on the potential introduction of a digital currency will be headed by the Treasury Department.

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Nellie Liang, Treasury undersecretary for domestic finance, announced Wednesday that the committee will include "leaders" from the Treasury, Federal Reserve, National Security Council, and other agencies.

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Speaking at an event hosted by the Atlantic Council think tank in Washington, Liang said the committee "will begin to meet regularly to examine a possible CBDC and other payment innovations." He was alluding to a central bank digital currency.

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Debates will probably center on whether a US CBDC would support US leadership in the global financial system, maintain national security, safeguard privacy, and deter use in nefarious financial operations.

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Liang reiterated that the Treasury and Fed are not yet persuaded that a US CBDC is necessary, making it clear that the news shouldn't be interpreted as a sign that the Biden administration has fully accepted the idea of a digital currency.

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She stated, "The Fed is engaged in technology research and testing to inform design choices so that it is positioned to issue a CBDC if it were decided to be in the national interest.

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Liang pointed out that some of the appeal of a CBDC would vanish with an enhanced interbank payments system. The US Federal Reserve is currently striving to roll out a widely used real-time payments system for banks.

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She also echoed worries expressed by policymakers that the stability of the established banking system might be jeopardized if CBDCs became widely available.

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She continued, "Retail CBDCs also carry dangers, such as the possibility of runs into a retail CBDC that might undermine private-sector lending during stress periods.

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Yet, regardless of whether the US chooses a CBDC, the Biden administration is eager to be involved in global planning required for the introduction of numerous digital currencies. According to Liang, the new US working group will try to discuss the problem with other nations and international organizations.

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We want to make sure that CBDCs work effectively and safely with the current financial infrastructure, supporting both financial stability and the integrity of the global financial system, she said.

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She continued by saying that international payment systems "should continue to represent broadly-shared democratic ideals like transparency, privacy, accessibility and accountability to the people that rely on them."

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Her statements come almost a year after President Joe Biden issued an executive order instructing several federal agencies, including the Treasury, to focus more on the investigation and potential regulation of digital assets, which can include a variety of crypto coins like Bitcoin, fixed-value stablecoins, and electronic money issued by central banks.