US Digital Currency
The US dollar could go digital. Here’s what you need to know
March 11, 2022
As technology continues to revolutionize the way people live, work and spend, central banks around the globe have kicked off efforts to reinvent their local currencies for the digital era. Now, the United States is the latest to signal “urgency” in researching a potential digital version of its dollar via a Central Bank Digital Currency, or CBDC.
Part of President Joe Biden’s executive order regarding digital assets on Wednesday includes “placing urgency on research and development of a potential United States CBDC, should issuance be deemed in the national interest,” according to an accompanying fact sheet released by the White House.
Biden’s executive order is centered around six priorities: “consumer and investor protection; financial stability; illicit finance; U.S. leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation.”
It directs the Department of Treasury to assess and develop policy recommendations and encourages regulators to ensure oversight, it encourages the Financial Stability Oversight Council to identify risks and develop policy recommendations on regulatory gaps, and it calls for a focus on coordinated action across federal agencies to mitigate illicit finance and national security risks.
Treasury Secretary Janet Yellen said the executive order will help the government make markets fairer and more transparent.
Global Government Forum Project
Governments around the globe are increasingly focused on the benefits of developing digital identify systems. The systems are viewed as ways to create secure online means for citizens to access government services as provision is increasingly moved online.
However, moving government services online requires two capabilities: departments must be able to share and match data on individuals, addressing any discrepancies between their datasets; and citizens need a single, secure, online access point.
Recent research by Global Government Forum interviewed seven senior national figures to find out what digital leaders need to succeed.
It highlighted the need for a single citizen digital identity system, built around either a ‘unique identifier’ – such as the reference numbers lying at the core of many national ID systems – or a ‘golden record’: a ‘single source of truth’ held by a designated civil service body.
The United Kingdom has recently embarked on a programme to develop a digital ID, while eight countries have drafted a set of high-level principles to support the development of mutually recognised and interoperable digital ID systems and infrastructure
The Digital Government Exchange (DGX) Digital Identity Working Group said that collaboration on digital ID could help “facilitate economic recovery from COVID-19, for example to support the opening of domestic and international borders”.
The 11 principles call for digital ID infrastructure to be open; transparent; reusable; user-centric; inclusive and accessible; multilingual; secure and private; technologically neutral and compatible with data portability; administratively simple; able to preserve information; and effective and efficient.
How are governments developing digital IDs in the UK, Germany, France, United States, Canada, Australia and New Zealand?
Countries are taking different approaches to this issue. The UK’s One Login programme, which will allow users to create a government account to access services online, or through an app.
The programme represents a shift in the government’s approach. Its previous effort was known as GOV.UK Verify, a web platform that allowed people to register to prove their identity with the proof then accepted by government departments and agencies to access services. The system was intended to provide assurance for people to register for services such as benefits, but suffered from low take-up.
Outside of Estonia, different European nations are also at different stages of development. The German government’s Digital Identities programme now allows German citizens will be able to save their electronic proof of identity from their German ID card directly onto their smartphone and use that electronic ID function via their smartphones. The French Government’s The French government agency, Agence Nationale des Titres Sécurisés (National Agency for Secure Documents) has selected digital ID firm IDEMIA to work on its national digital ID programme, France Identité Numérique.
National plans in European countries will also dock into the European Commission’s digital identity framework for citizens, with the German government stating that “our goal is to use interoperable ID solutions of the EU member states to establish a European alternative to non-European private ID services”.
Elsewhere, the Government of Canada’s government digital strategy, which includes a continued effort to introduce secure digital identities for citizens, while the US federal government has a programme for a real time digital ID verification service.
In Australia, the government has already established a digital identify system, with legislation published to expand the existing process “to a whole-of-economy solution so that all levels of government and private sector – especially small and medium businesses – can participate and share in the efficiencies and benefits that Digital Identity will bring for them and the community”.
Development of a digital identity system is a key foundation outlined in the New Zealand government’s Strategy for a Digital Public Service, with legislation planned to create a digital services trust framework after investment in the system was approved by ministers in June 2021.
DGX’s Digital Identity Working Group report highlighted that although its member countries’ existing policies were specific to their respective government’s requirements around digital identity, all were broadly aligned to ISO standards, EU standards or industry best practice.
“Across most member countries, trust frameworks, policy and legislation have been developed with future mutual recognition and interoperability in mind, opening up the broad opportunity to achieve interoperability between the digital identity systems and infrastructure,” it said.
Read GGF’s latest articles on the development of digital identity schemes by governments
Digital identity: what the UK government needs to get right in One Login programme
Pakistan to launch digital ID wallet this year
Eight countries set out principles for the future of digital ID
Global report reveals senior officials lack understanding to drive digital transformation of government
Asking the experts: What do digital leaders need to succeed?
Births, deaths and everything in between: designing services around peoples’ lives
EU presents plan for bloc-wide digital identity scheme
Government of Canada launches updated digital strategy
‘7 Lenses of Transformation’ system, developed in 2018-UK
Central bank digital currencies: foundational principles and core feature