Authored by Jannah Patchay, DPF Originating Member
On 9th March 2022, US President Biden issued an Executive Order on Ensuring Responsible Development of Digital Assets. The Order instructs a range of federal agencies and regulators to analyse and report back on various aspects of digital assets and the digital asset ecosystem, including, but not limited to, consumer protection, privacy, illicit finance, financial stability, environmental impact, and maintaining national security. From our perspective at the Digital Pound Foundation, we were particularly interested in the specific and prominent reference that Order makes to the role to be played by and potential development of CBDCs in the United States.
A few key highlights:
- The Order recognises that “[s]overeign money is at the core of a well-functioning financial system, macroeconomic stabilization policies, and economic growth.” In other words, a recognition of the key role that public money has to play in the US economy and financial system, and the need to explore CBDC as a new form of public, sovereign money, and to assess the potential benefits and risks.
- The Biden Administration “sees merit in showcasing United States leadership and participation in international fora related to CBDCs and in multi-country conversations and pilot projects involving CBDCs.” This represents a significant step forward for the US, which to date has not been an active participant in multilateral practical pilots and experiments (although it has participated in other multilateral initiatives such as the G7’s Public Policy Principles for Retail Central Bank Digital Currencies, where and also played a leading role as President of the G7 in 2020, convening the G7 Digital Payments Experts Group).
- The Order recognises the value and potential benefits of interoperability with other CBDCs, particularly in the potential to “support the continued centrality of the United States within the international financial system, and help to protect the unique role that the dollar plays in global finance.” It makes clear that any assessment of benefits and risks must take these objectives into account.
- In moving forwards, it instructs a number of government and regulatory agencies to produce and submit a report, within a clearly defined timeline of 180 days from the date of the Order, on the future of money and payment systems. It also sets out a number of topics to be considered in this report, including, but not limited to, the potential implications of various architectural and technical choices, the potential relationship between a CBDC and privately-issued digital money, as well as financial inclusion, monetary sovereignty, financial stability, geopolitical and monetary policy considerations.
- More broadly, the Order acknowledges the leading role that the US has played in advancing the agenda of CBDCs, stablecoins, and digital assets in international fora, and affirms its commitment to elevating the importance of these topics through its participation in organisations such as the G7, G20, FATF and FSB, and to maintaining a leadership position in the development of global principles and standards for digital assets and their usage.
Issuance of the Order represents a hugely important step forwards for the United States, essentially reflecting Executive Branch approval into the exploration of a CBDC. It is also notable in setting out a clear intent of the goals associated with a digital dollar, in terms of maintaining the United States’ position on the global stage. The Order calls for any future digital dollar to be designed “in a way that is consistent with United States priorities… and democratic values, including privacy protections” – a statement that is very much aligned with Digital Pound Foundation’s own advocacy for a well-designed digital Pound that reflects the values and needs of the UK economy and society as a whole.
Furthermore, the Order provokes more serious consideration and swifter implementation of a digital Pound at the highest levels of the UK government. If there are delays in decision-making regarding the establishment of a CBDC, the UK risks falling behind other G7 countries in economic development which could threaten its leadership position in fintech and financial services. The Order seems to make the question of CBDC implementation, one of ‘when’ rather than ‘if.’ One year on from publication of the HM Treasury-commissioned Independent report on the UK Fintech sector by Ron Kalifa, reactions to the prospective introduction of a CBDC remain mixed, with the Bank of England expected to commence a consultation process on the use case for CBDC sometime in 2022.
From the Digital Pound Foundation’s perspective, we welcome this Executive Order, and look forward to seeing the tangible outputs of the report later this year, and to the important contribution that it can make to the wider discussion of CBDCs – and the wider ecosystem of both public and private new forms of digital money – globally.