It seems that ever since the World Economic Forum in Davos earlier this year the world has woken up to the possibility of Central Bank issued Digital Currencies (CBDC). The likes of Japan, the UK, Sweden, Canada and the EU have all signalled their intentions to work towards launching their own CBDCs.
However, one major economy has been working on their own CBDC for some time now and instead of being in the experimental phases, China is getting near to launching their digital currency. China’s cryptocurrency has been heralded as a tool that will help the world’s second-largest economy perhaps compete and usurp the US as the global economic power.
This has become a concern of the US whose Dollar has had hegemony over the world economy, but has been challenged, and perhaps rather strongly now in the era of digitalization. What is more concerning is that the US has not been too welcoming or urgent in moving towards cryptocurrency, blockchain and CBDC.
That being said, there is evidence that the US has started their investigation towards a CBDC when a member of the United States Federal Reserve’s board of governors signalled that the institution is more open to the idea of central bank digital currency than previously.
The issue is that even though the US is happy to start looking into a CBDC Dollar, the feeling is not unanimous across the decision-makers as to the effect such a coin would have for the Fed.
Congressman Bill Foster (D-IL) has recently questioned the Chair of the Federal Reserve Jerome H. Powell on US’s CBDC progress at a hearing on monetary policy. Foster began his questioning by asking Powell:
“Do you think that establishing a digital dollar would help ensure that the U.S. dollar continues to serve as the core of the US and the world’s financial system?”
Powell agreed with the importance of the dollar to the US’s financial system:
“I think having a single government currency at the heart of the financial system is something that has served it well, it’s a basic thing that hasn’t really been in question.”
Getting left in the dark
The issue is that although on paper a digital dollar makes a lot of sense, and this is why it is starting to pique the interest across other central banks, it is uncertain until one is launched. For the US, who are used to being at the forefront of advances that keep them being a superpower, if they do not lead here, and China does, they could be left behind.