US Treasury to lead new working group looking at digital dollar

BLOOMBERG

The Treasury Department will lead a new senior-level working group that will soon start regular talks on the possible launch of a digital dollar.
The group will include “leaders” from the Treasury, Federal Reserve, National Security Council and other agencies, Nellie Liang, Treasury undersecretary for domestic finance, said.
In the coming months the group “will begin to meet regularly to discuss a possible CBDC and other payment innovations,” Liang said, referring to a central bank digital currency, in remarks at an event hosted by the Atlantic Council think tank in Washington.
Discussions will likely revolve around whether a US CBDC would help maintain US global financial leadership, preserve national security and protect privacy while preventing use in illicit financial transactions, she said.
Liang made clear the announcement shouldn’t be taken as a signal that the Biden administration has fully embraced the concept of a digital dollar, reiterating that the Treasury and Fed are not yet convinced a US CBDC is needed.
“The Fed is conducting technology research and experimentation to inform design choices so that it is positioned to issue a CBDC if it were determined to be in the national interest,” she said.
Liang noted that an improved interbank payments system could eliminate some of the appeal of a CBDC. The Fed is currently working to introduce a widely available real-time payments system for banks in the US.
She also repeated concerns among policy makers that a widely accessible CBDC could put the stability of the traditional banking system in peril.
“There are also risks to retail CBDCs, including the potential for runs into a retail CBDC that could destabilise private-sector lending during stress periods,” she said.
Whether or not the US adopts a CBDC, however, the Biden administration is keen to be involved in international planning necessary for the roll-out of multiple digital currencies. Liang said the new US working group will seek to engage with other governments and international agencies on the issue.
“We have an interest in ensuring that CBDCs interact safely and efficiently with the existing financial infrastructure, that they support financial stability and the integrity of the international financial system,” she said.
Global payments systems, she added, should “continue to reflect broadly-shared democratic values like openness, privacy, accessibility and accountability to the communities that rely upon them.”
Her remarks come nearly a year after President Joe Biden signed an executive order directing a number of federal agencies, including the Treasury, to devote more attention to the study and prospective regulation of digital assets.