President Joe Biden has directed work to begin creating a digital US dollar, weighing the risks and benefits of a move that could be a game-changer for the global financial system.

Amid the explosive growth of private cryptocurrencies such as Bitcoin, US efforts will give top priority to the research and development of a potential US central bank digital currency (CBDC), according to a White House statement.

The world's largest economy will join more than 100 countries exploring or piloting programs with their own central bank digital currency (CBDC), including the Chinese digital yuan.

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

And because of the global implications of the use of digital assets, Washington will work with other governments on efforts that will also address the risks associated with illicit funding, protect consumers and investors, and prevent threats to the financial system and the economy as a whole, Yellen said.

White House economic advisor Brian Deese noted that maintaining US global leadership is the main goal of these efforts. However, the study will also examine unintended consequences.

Officials dismissed the notion that Washington was late in its efforts to create a state-backed digital currency.

Biden's executive order calls on agencies, including the Treasury Department, to look into issues such as consumer protection, financial inclusion, and the use of digital assets for illegal activities.

The report submission deadline has been shifted from 30 to 180 days and will include consultations with the private sector.

Officials downplay competition from Beijing, saying the US dollar has been and will continue to be critical to the stability of the international monetary system as a whole and cryptocurrencies issued by foreign central banks do not threaten that dominance.

In addition to China, Nigeria launched its own virtual money in October and El Salvador allowed bitcoin to be used as legal tender.