While many digital-asset-related activities fall within existing U.S. laws and regulations, the rapid evolution and adoption of digital assets highlight unique risks that warrant a more comprehensive and aligned approach by agencies across the U.S. government with different regulatory remits. The Federal Reserve, as an independent central bank, is only one part of the puzzle. Many of these other stakeholders across the U.S. government, such as the Treasury Department, market regulators, and federal banking supervisors, will be involved in providing guidance and guardrails to the financial system as the universe of digital assets continues to evolve.7 In the current environment of rapid technological change, it is crucial that innovation proceeds responsibly in order to safeguard the stability of the financial system. To that end, on March 9 of this year, President Biden issued an Executive Order on Ensuring Responsible Development of Digital Assets. 8 This executive order outlined the first whole-of-government approach to addressing the risks and harnessing the potential  2/5  BIS - Central bankers' speeches  benefits of digital assets and their underlying technology. In response, over the past six months, agencies across the government have worked together to develop frameworks and policy recommendations that advance the six key priorities identified in the executive order: consumer and investor protection; promoting financial stability; countering illicit finance; U.S. leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation. The executive order will be a catalyst to increased coordination among U.S. regulators.
It is held by depository institutions as bank reserves or by individuals in the form of paper currency. Demand for central bank money is driven by many fundamental factors, including the settlement  1/5  BIS - Central bankers' speeches  of both retail and wholesale transactions and its role as a store of value. In addition to these factors, which are likely familiar to any of you who have studied monetary economics, demand for the U.S. dollar is also driven by international factors owing to the role of the dollar in the global economy. In fact, while precise estimates are challenging to come by, available data suggests that more than half of all dollars in circulation may be held outside the United States. 5 As a result, innovation related to money provided by the Federal Reserve will have impacts that extend far beyond U.S. borders. A U.S. CBDC – a digital form of the U.S. dollar that is a direct liability of the Federal Reserve– has the potential to offer significant benefits. It could enable a payment system that is more efficient, provide a foundation for further technological innovation, and facilitate faster cross-border transactions. It could promote financial inclusion and equity by enabling access for a broad set of consumers and foster economic growth and stability. In order to fully realize benefits such as these, a digital dollar would need to be thoughtfully designed and implemented.