US Fed analysts warn foreign CBCCs and stable currency could lead to ‘erosion of dollar’s role’
The Board of Governors of the United States Federal Reserve System recently released a research paper that examines the pros and cons of developing a central bank digital currency (CBCC) and tracking unnamed foreign powers.
CBCCs are government controlled digital currencies. Proponents argue that issuing the US CBCC will support the dollar's position as a global currency.
Detractors, on the other hand, insist that the CBCC opens the door to centralization, invasion of privacy and the ability of US authorities to freeze assets at any time.
In a recent paper, a pair of top economic analysts examined the potential impact of the US CBCC on the dollar and its role in international payments.
“More than 90% of central banks are investigating CBDCS,” the researchers said, adding that the Fed is also “exploring options and options for introducing CBC.”
Making the dollar competitive
The researchers seem to focus much of their concern on whether the dollar will be able to compete with foreign CBCCs if the United States does not issue its own.
According to the paper, there is little concern that the US dollar as a “unit of account” or “store of value” will be affected by the arrival of a “large and stable foreign CBCC” outside US jurisdiction.
However, the researchers note that the dollar may lose ground as global trade continues.
“Based on the design features of other CBCCs (or foreign currency recognized stable coins), there is a potential for the dollar's role as an intermediary to erode if the US CBCC is not issued or has unattractive design features.”
Politics and elections
CBDCs have been a point of contention among many American politicians. If elected, 2024 presidential candidate and former president Donald Trump has vowed to defeat any move to produce the CDC in office.
Related: Former US President Trump Stops Anti-Bitcoin, Says ‘You Can Live With It'
Meanwhile, a group of five US senators have introduced a bill that would effectively ban CBDCs in the country. According to a May 2023 poll, only 16 percent of those surveyed in the US support CBDC.
