A digital currency issued by the United States could be on the horizon.

The Biden administration is supporting research and development of a “U.S. Central Bank Digital Currency,” or CBDC.

The move is part of a broad executive order signed by President Joe Biden on Wednesday, which directs the federal government to investigate potential uses and regulations for digital assets such as cryptocurrencies.

“My Administration prioritizes research and development efforts into potential design and deployment options for a United States CBDC,” according to the executive order.

The order directs a wide range of agencies to conduct research and submit reports on a wide range of issues surrounding digital currencies, ranging from design and security to financial and societal implications. “We are aware that the implications of potentially issuing a digital dollar are significant. “They’re extraordinarily broad,” a senior administration official told reporters on a conference call Tuesday.

Although a digital currency in the United States would not necessarily alter everyday experiences such as purchasing goods and services, economists believe it could transform central and commercial banking, as well as government sanctions, banking accessibility, and taxes.

According to a fact sheet released by the White House, the executive order will direct the government to investigate the technical requirements for a digital currency and advocate for the Federal Reserve to continue its research and development.

In January, the Fed issued a white paper on the possibility of establishing a CBDC to supplement existing payment systems. It discovered that while a CBDC could make payments cheaper and easier for consumers, it could also jeopardize the stability of the US financial system.

In its fact sheet, the administration also stated that it would “direct an unprecedented focus of coordinated action across all relevant U.S. Government agencies to mitigate the illicit finance and national security risks posed by the illicit use of digital assets.”

The United States would not be the first country to have a digital currency. China has launched its own CBDC, with over 140 million people opening digital “wallets,” and many other countries have either launched or are in the process of developing digital currencies. The Bahamas’ Sand Dollar is regarded as one of the most valuable in the world.

Yermack believes the Biden administration’s move points to the inevitability of a broader shift toward digital currencies.

While the administration fact sheet did not go into detail about how a digital currency in the United States might function, Yermack suggested that the functionality could be fairly simple, with transactions flowing directly to and from the Fed, bypassing banks and payment systems and creating near-seamless cash flows.

It’s a straightforward idea with far-reaching implications. According to Yermack, a widely accepted digital currency would raise existential concerns for banks and many other financial services that facilitate payments.

According to Michael Bordo, a professor of economics and the director of the Center for Monetary and Financial History at Rutgers University in New Jersey, digital currencies open up new possibilities for how the government conducts policy.

He believes that a digital currency could make the kind of stimulus payments seen during the coronavirus pandemic nearly instantaneous and far more efficient, potentially reaching people who have previously been denied access to banking services.

Aside from the consumer benefits, a digital currency in the United States would provide the Federal Reserve with a new tool that economists had previously only theorized about: negative interest rates.

The Fed’s primary tool for stimulating or cooling the economy is interest rate control, but it has limitations. Banks can only reduce interest rates on regular money to a certain level, known as the zero bound, leaving central banks with few options when interest rates are already low and the economy requires assistance.

Despite all of the theoretical possibilities, a digital currency in the United States faces a number of real challenges. Commercial banks, according to Bordo, have a vested interest in opposing the technology.

Nonetheless, there is a growing interest in government-backed digital currencies. Yermack stated that he has advised major governments considering launching their own currencies, and that as more countries adopt their own, “the others are likely to fall into line pretty quickly.”