Unlike private cryptocurrencies such as bitcoin, a Fed-issued central bank digital currency would be backed by the U.S. central bank, just like the Fed backs physical currency.

The idea faces stiff resistance. The banking industry generally says the costs of a central bank digital currency outweigh any benefits and that it would directly compete with private bank deposits, making loans more expensive.

Some in Congress say the U.S. is already behind the curve. Among the Group of 20 major economies, 16 are in the development or pilot phase of a digital currency, according to the Atlantic Council, a Washington think tank. The European Central Bank, on behalf of countries including Germany and France, is exploring designs for a digital euro and preparing to launch a test pilot.

Mr. Hill, the Arkansas Republican, said his concerns were animated in part by China, which began real-world testing of its own central-bank–issued digital currency in 2020. In an interview, he said China’s lending practices in the developing world could make it easier for the country to promote international uses of its digital currency—a potential threat to the dollar-based global economy.

“We should be concerned about China’s predatory practices,” he said. Chinese authorities haven’t ruled out international use of the e-CNY, the official name for the country’s digital currency, but say it is designed for small-scale domestic use by consumers.

Analysts are looking for signs that the People’s Bank of China will take concrete steps to join with central banks elsewhere to make it possible to use digital currencies between countries. The bottom line is that Beijing is uncomfortable with the outsize role the U.S. dollar plays in global commerce and in particular fears being frozen out of the dollar-based financial system, such as in response to a conflict over Taiwan.

International transactions in a digitized currency created by China, the thinking goes, could be a defensive weapon in such circumstances because they would happen beyond the reach of the U.S.

Some lawmakers say Congress ought to authorize a digital dollar, not just study it. “I do feel some urgency because other countries are moving ahead,” said Rep. Jim Himes (D., Conn.), in an interview. “The moment is now for CBDC.”