President Joe Biden on Wednesday ordered government agencies to begin work on creating a digital US dollar, weighing the risks and benefits of a move that could be a game changer for the global financial system.

Coming amid the explosive rise of private crypto currencies like bitcoin, the US effort will place "the highest urgency on research and development efforts into the potential design and deployment options of a United States" digital currency, according to an executive order signed by Biden.

"A United States CBDC may have the potential to support efficient and low-cost transactions, particularly for cross border funds transfers and payments, and to foster greater access to the financial system," the order said, adding it could also be less risky than private digital assets.

The world's largest economy will join more than 100 countries that are exploring or have launched pilot programs with their own central bank digital currency (CBDC), including China's digital yuan.

Treasury Secretary Janet Yellen said agencies will "evaluate the potential financial stability risks of digital assets and assess whether appropriate safeguards are in place."

And due to the global implications of using digital assets, Washington will work with other governments on the effort that "will also address risks related to illicit finance, protecting consumers and investors, and preventing threats to the financial system and broader economy," Yellen said in a statement.

Governments and investors around the world rely on the US greenback as a secure investment, and the dollar is central to commerce as well, including the global oil market.

White House economic adviser Brian Deese said "maintaining US global leadership" is a central goal of the effort. However, the study also will look for "unintended consequences," he said on CNBC.

'Very deliberate' 

Officials rejected the notion that Washington is late to the effort to create a government-backed digital currency.

"We've got to be very, very deliberate about that analysis because the implications of our moving in this direction are profound for the country that issues the world's primary reserve currency," an official said.

Biden's executive order called on agencies including the Treasury Department to examine issues including consumer protection, financial inclusion and use of digital assets for illicit activities.

The reporting deadlines are staggered, ranging from 30 to 180 days, and will include consultations with the private sector. The United States "can move quickly, but we can also move in a way that's smart and that's inclusive," the official said.

The officials downplayed competition from Beijing, saying the US dollar "has been and will continue to be crucial to the stability of the international monetary system as a whole" and those issued by foreign central banks "do not threaten this dominance."

In addition to China, Nigeria in October launched its own virtual money, while El Salvador has allowed bitcoin to serve as legal tender.

Need for oversight

Digital assets, including cryptocurrencies, have seen explosive growth in recent years, surpassing a $3 trillion market cap last November, from $14 billion just five years prior.

The White House said around 16 percent of adult Americans -- approximately 40 million people -- have invested in, traded or used cryptocurrencies.

However, "without oversight, the explosive growth in cryptocurrency use would pose risks to Americans, to the stability of our businesses, our financial system and our national security," the official said.

Another official stressed the need to ensure all Americans benefit from advances, since "earlier forms of financial innovation have ended up hurting American families while making a small group of people very rich."

The US Federal Reserve released a report in January noting that digital currencies could offer potential benefits to American consumers and businesses, but said it is not clear they would outweigh the potential risks.

These include concerns the currencies could be used to evade sanctions like those imposed on Russia for its invasion of Ukraine, but the official said they have not been a "viable workaround" for the "financial sanctions we've imposed across the entire Russian economy."

Under Biden's order, US government agencies will look into preventing money laundering as well as efforts to use digital currencies to evade financial sanctions, while the Fed "is encouraged" to study the potential uses of an American CBDC.