According to White House sources, President Joe Biden will direct government agencies to begin work on developing a digital US dollar on Wednesday.
Against the backdrop of the meteoric ascent of private cryptocurrencies such as bitcoin, the US effort would investigate the benefits and potential hazards while "putting urgency on research and development of a prospective United States CBDC," according to a statement.
The world's largest economy will join more than 100 other countries that are investigating or have already begun pilot projects with their own central bank digital currency (CBDC), including China's digital yuan.
Officials refuted the suggestion that Washington has been slow to join the effort.
"The consequences of potentially issuing a digital dollar are enormous," one official told reporters, emphasizing the American currency's critical position in the global economy.
"We have to be very thorough in our thinking because the ramifications of moving in this route are enormous for the country that provides the world's major reserve currency."
Biden's executive order will direct agencies such as the Treasury Department to investigate concerns such as consumer protection, financial inclusion, and the use of digital assets for illegal purposes.
The US "can move swiftly, but we can also move in a wise and inclusive way," according to the official.
The authorities dismissed Beijing's competitiveness, claiming that the US dollar "has been and will continue to be vital to the stability of the international monetary system as a whole," and that those issued by foreign central banks "do not threaten this dominance."
The global rise of cryptocurrencies and the increased usage of digital payments has fueled interest in an official digital currency, and major central banks around the world are investigating the possibility: Nigeria introduced its own virtual currency in October, and El Salvador has made bitcoin legal tender.
However, the official stated that "without control, the tremendous development in cryptocurrency use would pose hazards to Americans, the stability of our businesses, our financial system, and our national security."
Another official emphasized the importance of ensuring that breakthroughs benefit all Americans, stating that "previous types of financial innovation have ended up hurting American households while making a small group of individuals very affluent."
The US Federal Reserve issued a paper in January stating that digital currencies may bring potential benefits to American consumers and businesses, but that it is unclear if these benefits would exceed the risks.
According to Biden's directive, US government agencies will investigate efforts to prevent money laundering as well as efforts to exploit digital currencies to circumvent financial penalties.
However, despite concerns, the official stated that they have not been a "viable workaround" for Moscow to avoid the "financial sanctions we've placed across the whole Russian economy" following the invasion of Ukraine.
