RELATED — <a href="https://www.thenationalnews.com/business/cryptocurrencies/2022/03/09/dubai-adopts-first-law-regulating-virtual-assets/" target="_blank">Dubai adopts first law regulating virtual assets</a> US President Joe Biden has ordered the federal government to look into creating a <a href="https://www.thenationalnews.com/world/us-news/2022/03/08/biden-expected-to-issue-executive-order-on-cryptocurrency/" target="_blank">Central Bank Digital Currency</a>, also known as a <a href="https://www.thenationalnews.com/business/2022/02/09/what-is-the-future-of-money-its-digital-and-backed-by-central-banks-imf-says/" target="_blank">digital dollar</a>, in a move that has the potential to reshape how <a href="https://www.thenationalnews.com/business/economy/2021/09/29/digital-currencies-can-help-reduce-cost-and-time-of-money-transfers/" target="_blank">money is moved</a> and used around the world. Before his order results in a virtual greenback, there will be numerous major effects — and <a href="https://www.thenationalnews.com/business/banking/2021/10/01/central-banks-foresee-risks-in-using-government-backed-digital-currencies/" target="_blank">risks</a> — to consider first. Here are some key questions to consider. It would still be a dollar issued by the US Federal Reserve, as is the case with all US bills and coins used now, but in a digital form that is accessible to everyone, not only financial institutions. Unlike money deposited in a bank account or spent via apps such as Venmo and Apple Pay, it would be registered in the accounts of the Fed, not a bank. At the same time, the digital dollar would be worth the same as its paper counterpart, a divergence from cryptocurrencies that currently have highly volatile valuations. Key questions remain unanswered, such as whether a digital dollar would be based on blockchain technology such as Bitcoin or if it would be linked with some sort of payment card. Mr Biden is asking agencies, including the Treasury Department, to examine various issues on the topic. If the government decides to go ahead, it could take “a number of years” before the country can use a digital dollar — authorities will have to explore, for instance, which technology to use, said Darrell Duffie, a digital currencies expert at Stanford University in California. It would reduce or even eliminate transaction fees since exchanges would no longer go through banks, bank cards or apps that take commissions on every payment. Proponents say it would help people without bank accounts, about 5 per cent of households in the US, and could make it easier for the government to pay benefits. There are risks such as a system failure or a cyber attack and there are also questions about privacy, as the government could theoretically have access to all transactions. The banking system could also be undermined as lenders currently use customers' deposits to lend to others and with a digital dollar, they could have less money at their disposal. International transfers, often slow and expensive to make, could be greatly eased. An operation that currently takes two days to be validated could be done in one hour, said Marc Chandler, a foreign exchange expert for the broker Bannockburn. For Mr Chandler, the geopolitical role of the US dollar would not be upset by the digital version's introduction. A digital dollar would represent “a natural evolution rather than a revolution”, he noted, recalling that more than $6.5 trillion is already exchanged in electronic form every day on the foreign exchange market. Even if China launches a large-scale digital yuan, as is being discussed, Mr Chandler said he does not think that changes the country's role in the world economy as “there will always be questions of trust, transparency, depth of markets”. However, if the US wants to continue to benefit from the dollar's status as the dominant currency in central bank reserves and international payments, it is essential that the government tread cautiously, Stanford's Mr Duffie said. “The US is going to need to ensure that it stays in a leading position in international forums that discuss standards for making cross-border payments standards for digital currencies,” he said. Other countries are already working on digital versions of their own currencies, from the eurozone to <a href="https://www.thenationalnews.com/opinion/comment/2022/02/22/what-does-the-digital-rupee-say-about-the-future-of-indian-society/" target="_blank">India</a>, but “there is no evidence to suggest being first to market provides any significant or material advantages”, said Jamiel Sheikh, founder of CBDC Think Tank. On the contrary, failure due to unintended consequences, low usage or other issues can undermine faith in the issuing institution, he said. “The overwhelming dominance of the dollar gives the US the luxury of learning from … other countries,” Cornell University professor Eswar Prasad said. If properly designed, a digital dollar could be more preferable for domestic use than a cryptocurrency, said Mr Duffie. For international transfers, however, he said he was “sceptical that large central banks like the Fed or the ECB, China or Japan, will give accounts at the central bank to people all over the world”. If the US did so, he noted, it could wreck the monetary system of small countries whose people might prefer to use the digital dollar rather than the local currency.