Special Report: The Digital Dollar Born with Biden Executive Order
For the digital dollar the answer you get, depends on the questions you ask
“My Administration places the highest urgency on research and development efforts into the potential design and deployment options of a United States CBDC.“
The digital dollar CBDC was just born on March 9, 2022 thanks to Joe Biden’s “Executive Order on Ensuring Responsible Development of Digital Assets” which calls for a full report on CBDC issuance within 180 days. Kudos to Biden and his team. (see below for highlighted executive order)
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Here’s why this report will give birth to a digital dollar CBDC and why I’m not premature in calling this a “done deal.” These two critical sections ensure a digital dollar because they mandate that the report contain the following analysis: (See below PDF page 5, Section 4, (iii) (b) (v) and (7) both in blue)
(v) the extent to which foreign CBDCs could displace existing currencies and alter the payment system in ways that could undermine United States financial centrality;
(vii) an assessment of the effects that the growth of foreign CBDCs may have on United States interests generally.
These report sections can only have the following answers:
◾️ foreign CBDC could potentially undermine the US dollar’s “financial centrality” by providing an alternative to the dollar.
◾️ foreign CBDC growth could potentially impair US interests if the US does not have a digital currency to counter their influence, and/or dollar-based systems are bypassed by their adoption. (sanctions)
There are simply no other answers to these two questions. They are indisputably true and no incumbent bank or card company lobbying against a digital dollar can debate that foreign CBDCs do not have this “potential.”
Protecting the dollar
The administration wants to protect the US dollar dominance for years to come and states why it’s so important:
“The United States derives significant economic and national security benefits from the central role that the United States dollar and United States financial institutions and markets play in the global financial system.”
Without a CBDC the US will simply miss a major market opportunity that it will hand to China and others. As Fed Governor Lael Brainard bravely and correctly commented: “I can’t wrap my head around the US not having a CBDC.”
No one in gov’t wants to be responsible for putting the dollar at risk. While the Fed’s Powell may be anti-CBDC, he will have to answer to numerous other policy “wonks” in this report who will lay waste to his absurd notion that there is “no first-mover advantage with CBDC.”
Financial Inclusion & China
The report also gives high priority to financial inclusion and I congratulate the authors for giving this topic the status it so justly deserves, despite proclamations from banks that everything is just fine. It is point (ii) just after design:
(ii) the potential implications a United States CBDC might have on financial inclusion;
Now for those curious to see China’s impact on this report the Presidential Order references “democratic values” three times and US values once. Let’s make it clear that these references to “values” are aimed squarely at China’s CBDC.
If the US can make a CBDC with better privacy than China’s it will have a shot at claiming the “values” race. So far the US’s Project Hamilton’s history free token could represent an improvement over China’s but details on the system are still incomplete.
Crypto gets hammered in the executive order, time and time again being referred to in disparaging terms:
“Digital assets may pose significant illicit finance risks, including money laundering, cybercrime and ransomware, narcotics and human trafficking, and terrorism and proliferation financing.”
Anyone reading the report will get a strong sense that CBDCs are preferred to crypto at all costs. In addition there will be no lighter versions of regulations for crypto as they will be held to a “same business, same risks, same rules” approach.
A digital dollar is coming
"The answers you get, depend on the questions you ask." And no one can read this executive order without walking away with a clear view that a digital dollar is a necessity. The challenge of China’s digital yuan and other foreign CBDCs, crypto, and a real need for financial inclusion in the US all point to a real need for a digital dollar.
Because the the questions asked in the executive order are all pro-CBDC it is impossible to see how the final report can conclude that it is not in America’s interests to create a digital dollar.
Download the Executive Order with my highlights showing critical sections that you need to read. Download here
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Rich Turrin is the international best-selling author of "Cashless - China's Digital Currency Revolution" and "Innovation Lab Excellence." He is an Onalytica Top 100 Fintech Influencer and an award-winning executive previously heading fintech teams at IBM following a twenty-year career in investment banking. Living in Shanghai for the last decade, Rich experienced China going cashless first-hand. Rich is an independent consultant whose views on China's astounding fintech developments are widely sought by international media and private clients.
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