Top US Treasury Official Says Leaders ‘Actively Evaluating’ Digital Dollar Question

Nellie Liang, the U.S. Treasury Department's undersecretary for domestic finance, suggested that the federal government’s work on a potential digital dollar is accelerating, saying leaders from various agencies and White House offices are starting meetings in the “coming months.”

While she was clear in remarks Wednesday that no decision has been made and U.S. officials are “actively evaluating whether a CBDC is in the national interest,” she highlighted some of the potential benefits of a central bank digital currency (CBDC) in a speech for the Atlantic Council.

Setting up a digital dollar, she said, “could help preserve the dollar's global role” and possibly reduce frictions in cross-border transactions. But even if the U.S. doesn’t issue one, she said, government officials are exerting influence with U.S. allies toward “responsible development of CBDCs” in other places, noting that 11 jurisdictions have already moved ahead with their virtual currencies.

Liang said she expects the U.S. process will closely resemble the steps being taken in the U.K., which she noted is further along, having issued a paper last month suggesting the Bank of England will likely need to put out a digital pound at some point. Meanwhile, the European Commission is gearing up to publish a bill in May to underpin a digital euro.

Closer to home for the crypto sector, Liang suggested that CBDCs may become a key element for stablecoin use in the industry.

“It might be used as a backing asset for stablecoins, which could make it easier to transfer value among stablecoins in addition to supporting greater interoperability and choice,” she said.

Liang also mentioned some of the potential risks to establishing a digital dollar, including that a retail version could be vulnerable to destabilizing runs.

The Treasury Department is leading a government working group that’s trying to answer policy questions, and the Federal Reserve – which would ultimately issue a potential CBDC – is separately working on figuring out the potential structure and use for the digital dollar in case the Fed is given a green light from the Biden administration and Congress to go ahead.

Liang, whose remarks were some of the most detailed from a federal official on CBDC progress in months, said the process is still in the research phase and officials are spending much of their time trying to work out whether the U.S. would be best served by a wholesale digital dollar or one available at a retail level to the wider public. She said the group is examining possible trade-offs over privacy concerns, such as setting up a tiered system in which smaller transactions could gather less data about those involved.

If a government token does become available in the future, she said it doesn't cut off other similar avenues for making payments, including a real-time payments system the Fed is expected to launch this year.

"I don't think there's a predetermined outcome at this point," she said, adding the future could include tokenized bank deposits, CBDCs and private-sector stablecoins. "There's not a presumption that if a CBDC were offered that there would be no other options."

She said the government wouldn't decide to establish a digital dollar without a sense that the public wants one, and she said her working group will issue “interim public updates” on its progress.

Just one day earlier, a recent top economic adviser for President Joe Biden, Daleep Singh, told U.S. senators that an executive order issued last year was meant to push for the launch of a CBDC. But at least one of the Federal Reserve Board governors, Christopher Waller, is openly opposed to the idea.

UPDATE (March 1, 2023 19:10 UTC): Adds additional information.