Deputy Treasury Secretary Justin Muzinich said in a digital seminar on Wednesday morning that the U.S. Treasury is studying central bank digital currency (CBDB) tied to the dollar.
This process is playing out alongside the long-term research initiative being conducted by the U.S. Federal Reserve, the central bank of the United States.
“There are clearly efficiency benefits and cost benefits to using a distributed ledger,” Muzinich said. “And I also think, more broadly, it’s important for the government to embrace innovation and not be scared by it.”
Muzinich mentioned that part of the reason why the Treasury is investigating digital currencies is that it can be used to evade existing frameworks, such as those for anti-money laundering and financing terrorist frameworks.
However, implementing government-issued cryptocurrency could alter the money supply or cause financial disruption, Muzinich notes, such as if foreign hackers acquired a majority of the coins. Concerns also arise if stablecoins shift from being fully reserved to partially reserved, or if the underlying basket of reserve currency changes. Muzinich said “this could cause financial destruction.”
Many institutions around the world, central banks in particular, are exploring the development, use and deployment of digital currencies.
The Block recently published a wide-ranging research report on the matter, which can be found here.