The possibility of a digital dollar has been a topic of discussion in the United States for some time, and American experts have shared their thoughts on the issue.
CBDCs could crowd out crypto
At a recent Senate Banking Committee hearing, former Deputy National Security Adviser for International Economics in the Biden administration, Daleep Singh, spoke about the benefits of a central bank digital currency (CBDC) for the U.S.
According to Singh, a digital dollar would “crowd out” the cryptocurrency ecosystem, which he believes facilitates ransomware attacks and contributes to the evasion of U.S. sanctions.
He suggests that a CBDC is the best way to protect national interests and security. However, some experts have concerns about the impact on the crypto industry.
Franklin Noll, the President of Consulting firm Noll Historical Consulting, also believes that the currencies could “crowd out” private cryptocurrencies, particularly stablecoins focused on retail payment areas.
He suggests that cryptocurrencies will remain in niches where they provide specialized services, but CBDCs could become the primary form of digital currency.
China has a first-mover advantage
While the U.S. continues to explore the potential benefits and risks associated with CBDCs, China has already implemented its own digital yuan.
Yaya Fanusie, a cryptocurrency researcher and former CIA analyst, believes that the U.S. government’s slow start on CBDC development could result in losing its grip on the global financial system.
Fanusie suggests that if the U.S. continues to lag on CBDC adoption, sanctioned states will look for financial infrastructure that isn’t controlled or heavily influenced by the U.S.
If the U.S. has little influence over these new standards, it could impact its economic statecraft. Fanusie warns of unforeseen geopolitical implications over time and an unspoken “race” in the CBDC frontier as nations look to gain a geopolitical edge.
The U.S. Federal Reserve has made progress on its digital dollar project, but it has yet to receive approval from the U.S. government to proceed. In January 2023, the Federal Reserve released the latest version of its white paper on the CBDC.
A CBDC could offer significant benefits for the U.S., including increased financial inclusion and faster and cheaper cross-border payments. It could also provide a more secure and stable payment system than private cryptocurrencies.
However, experts warn of potential risks, such as the impact on privacy and the potential for government surveillance.