Biden issues executive order ordering government to study digital dollar

The move comes amid growing concerns that Russian firms and individuals could use crypto to evade recent sanctions

US President Joe Biden last month signed an executive order to prohibit trade and investment between US individuals and the two breakaway regions of eastern Ukraine recognised as independent by Russia.  Reuters
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US President Joe Biden signed an executive order on Wednesday requiring the government to assess the risks and benefits of creating a central bank digital dollar, as well as other cryptocurrency issues, the White House said.

Mr Biden's order will require the Treasury Department, the Commerce Department and other key agencies to prepare reports on "the future of money" and the role cryptocurrencies will play.

The Federal Reserve issued a paper on the topic in January that explores the risks and benefits of US-backed digital currency.

The move comes as administration officials have raised concerns in recent weeks about Russia’s use of cryptocurrency to evade the impact of crushing sanctions in response to its invasion of Ukraine.

The sanctions have sent the rouble to historic lows and have closed the country's stock market.

The executive order is part of an effort to promote responsible innovation but mitigates the risk to consumers, investors and businesses, Brian Deese, director of the National Economic Council, and Jake Sullivan, White House national security adviser, said in a statement.

"We are clear-eyed that 'financial innovation' of the past has too often not benefited working families, while exacerbating inequality and increasing systemic financial risk," they said.

Implicit in the order will be that cryptocurrency will remain a part of the US economy for years to come.

While US officials have played down the significance of cryptocurrency to Russia’s ability to evade sanctions, it remains a concern.

“We will continue to look at how the sanctions work and evaluate whether or not there are liquid leakages and we have the possibility to address them. I often hear cryptocurrency mentioned and that is a channel to be watched,” Treasury Secretary Janet Yellen said last week.

The US will monitor developments with an eye to maintaining the centrality of the dollar in the global economy, the White House said.

In addition, the order asks agencies, including the Securities and Exchange Commission and the Consumer Financial Protection Bureau, to review other issues raised by cryptocurrencies, including systemic risk and consumer protection.

A senior administration official who spoke on condition of anonymity said the president's national security team has already been on the lookout for the use and creation of front companies and alternative financial institutions that Moscow might try to employ to get around sanctions.

Crypto is one of several spaces that the Biden administration is looking to shore up as it tries to make certain that sanctions on Russia have maximum impact. The official said past experiences in Iran and Venezuela with sanctions evasion are informing the administration’s efforts. Additional export controls and new sanction targets are expected to be unveiled in the days and weeks ahead to counter Russian sanction evasion efforts, the official said.

On Monday, the Treasury's Financial Crimes Enforcement Network issued an alert advising financial institutions to be “vigilant” against any efforts to evade sanctions in connection with Russia's war in Ukraine.

“Although we have not seen widespread evasion of our sanctions using methods such as cryptocurrency, prompt reporting of suspicious activity contributes to our national security and our efforts to support Ukraine and its people,” acting Director Him Das said in a statement.

Updated: March 09, 2022, 3:36 PM