The digital dollar (CBDC) advances under the White House’s “first-ever” digital asset framework

The Fed will continue its CBDC study as Republicans urge the Fed to explain its position on digital currency issuance.
The Federal Reserve has been charged by the United States government to continue its continuing central bank digital currency (CBDC) research under the nation’s “first-ever comprehensive framework for responsible development of digital assets.”

The Treasury Department has been asked to chair an interagency working group to help the central bank.

On Friday, the White House revealed its framework, which includes suggestions from multiple federal agencies’ studies as a follow-up to President Joe Biden’s executive order in March.
On Friday, the Treasury released three papers that urged the development of a potential US CBDC if proven to be of national interest.

According to the Atlantic Council, at least 105 nations are investigating CBDC advancements, with China being one of the most advanced among large economies.

Since October 2020, China has been testing the CBDC, also known as the digital yuan or e-CNY. Since then, the trials have been expanded to at least 23 cities and areas.

Although President Biden requested the federal government in the executive order to explore and build a digital currency, the Fed has yet to make a judgment on the prospective issue of a digital dollar.
In May, Fed Vice Chair Lael Brainard stated that the central bank will not proceed with a CBDC unless both the executive branch and Congress support it, prompting Republican members of the House Financial Service Committee to demand that the Fed’s top official clarify the Fed’s stance on digital currency issuance.

Industry observers have questioned the Fed’s reluctance to commit to digital dollar innovations, claiming that the expansion of China’s CBDC may jeopardize the US dollar’s hegemony.

Financial services that are “safe” for everyone
In the framework, the White House also emphasized investor protection.

Following the Terra-LUNA crisis, the cryptocurrency sector had multiple bankruptcies and liquidations.
Mostly as consequence, Asian nations such as Singapore, India, and Thailand are strengthening governmental regulation of the industry in order to combat money laundering and increase investor safety.

The Financial Stability Oversight Council (FSOC) will release a study in October to evaluate the financial stability concerns presented by digital assets and offer suggestions if regulatory holes are identified, according to the White House.
The Treasury, for its part, plans to conduct a “illicit finance risk assessment” on decentralized finance (DeFi) by February 2023, followed by a review of non-fungible tokens (NFTs) in July 2023.

According to the White House, the President will explore whether to request that Congress alter the Bank Secrecy Act and whether current rules against unlawful money transfers should apply to digital asset service providers.

President Biden will also consider pressing Congress to enhance penalties for unlawful money transfers and modifying some federal legislation to allow the Department of Justice to prosecute digital asset crimes in any nation where a victim is located.