The Digital Dollar Project early Wednesday issued recommendations that include bigger investments by the federal government in researching a tokenized digital dollar. The group also called on the United States to exert leadership internationally in setting global standards for government-issued digital currencies even if the U.S. itself ultimately refrains from developing a digital dollar, and called for greater understanding in the private sector regarding the potential impact of central bank digital currencies developed outside of the U.S.
The recommendations, included in an updated version of a white paper the DDP originally issued in May 2020, come as nations have grown more active in developing and deploying CBDCs. “When we published the original white paper in 2020, the U.S. government had not yet recognized the importance of exploring a CBDC. Just three years later, both the public and private sectors have moved from a sense of complacency to urgency,” said J. Christopher Giancarlo, executive chairman and co-founder of the Washington, D.C.-based DDP, in a statement.
Aside from advocating for more active leadership by the U.S. government, the latest version of the white paper calls for more public investment in what it calls a tokenized digital dollar, contrasting it with so-called account-based currency. The latter, which relies on exchanges between accounts held by financial institutions, has been the controlling model historically for most financial exchanges. A tokenized digital dollar, by contrast, would require public-private partnerships to “reimagine the rails” undergirding exchanges, the updated DDP paper says.
The DDP has been active in recent months in launching projects to better understand the technology supporting a CBDC for the United States. In August, for example, it launched what it called a “sandbox” program to come to a clearer understanding of the technical requirements for a U.S. CBDC.
Central bank digital currencies are issued by national governments as digital versions of paper money and coins and are tied to the value of those national currencies. Eleven countries have issued a CBDC so far, while another 114 are involved in developing one, according to the Atlantic Council, which tracks the technology. This contrasts with the picture less than three years ago, when 35 countries were investigating the concept and none had deployed a CBDC.
In March, President Biden issued an executive order requiring a range of federal agencies to study cryptocurrencies as well as the concept of a CBDC for the United States.
For now, the DDP promises further work toward CBDC development. “Our contributions to shaping the future of money have just begun, and this newly released paper marks an important step for what is to come in the new year,” said DDP executive director Jennifer Lassiter, in a statement. Lassiter left the Consumer Financial Protection Bureau in October 2021 after seven years with the regulator and took over the reins at the DDP the following month.
The organization was launched early in 2020 by the consulting giant Accenture Inc. and Giancarlo, a lawyer who served for two years as chairman of the Commodity Futures Trading Commission, stepping down in July 2019.