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- Welcome to the world of CBDC, or central bank digital currency, where major countries like China and little ones like the Bahamas are attempting to establish themselves
- With the CBDC, the digital yuan, they have already transacted over $5 billion in value
- A hearing on the merits and downsides of central bank digital currencies was held by the House Committee on Financial Services in the United States
Welcome to the world of CBDC, or central bank digital currency, where major countries like China and little ones like the Bahamas are attempting to establish themselves. In this scenario, 86 percent of central banks are attempting to establish digital currencies. Almost 60% of them are working on the notion, with 14% having already launched a trial program. A CBDC is the digital equivalent of a national currency that may be traded globally. You can maintain digital money on your smartphone to buy whatever you want, unlike a national currency. Five countries have already made their digital currencies available. According to the Atlantic Council, 81 nations (representing 90 percent of global GDP) have already begun to investigate digital money. And this is only the start. According to a Bank for International Settlements (BIS) report released in January, the digital money will flourish in the next years. According to the BIS, one-fifth of the world’s population will soon use digital currency. Right now, China is at the top of the league.
With the CBDC, the digital yuan, they have already transacted over $5 billion in value. Some fear that this will give China an advantage over the dollar’s standing. But how may CBDCs be used? Well, there are a few options. They will be able to purchase basic needs such as food and medical supplies. It is preferable, however, if the digital currency is not used to purchase alcohol or cigarettes. During a pandemic, digital currency can potentially be useful. It can quickly distribute government help via digital wallets. It may also assist the authorities in preventing fraud. The Federal Reserve of the United States is wary about central bank digital currencies. They have a long way to go before they can create their own digital money. Meanwhile, a Bank of America research claims that digital money would help the US dollar stay very competitive relative to other currencies.
A hearing on the merits and downsides of central bank digital currencies was held by the House Committee on Financial Services in the United States. Many participants who attended the hearing, including Julia Coronado of MacroPolicy Perspectives, stated that the United States needs to take CBDC more seriously and take a leadership role. China is already ahead of the pack, and other countries are gaining ground. If America maintains its relaxed approach toward digital money, it will miss out on the opportunity to shape its future. One probable explanation for America’s lack of action on digital money is that the US dollar continues to reign supreme. What America does not realize is that CBDCs have the potential to dethrone the US dollar as the world’s reserve currency in the future.
A digital currency would remove barriers to countries doing direct financial transactions with one another. They would no longer be reliant on the US dollar. The US dollar’s dominance is due in part to its status as a reserve currency. It is used for the sake of convenience. However, with the advent of digital money, these individuals will be able to effect a direct settlement between trading pairs. The dollar is a crucial component of American foreign policy. The US government has the power to exclude sanctioned countries from the dollar-based system. Everything now hinges on the United States. If the government does not establish its own CBDC, it may not be able to obtain much data on cross-border transactions in the future. Other nations would not need to use the Society for Worldwide Interbank Financial Telecommunication network, which America can regulate if they used digital currency for transactions.
With a background in journalism, Ritika Sharma has worked with many reputed media firms focusing on general news such as politics and crime. She joined The Coin Republic as a reporter for crypto, and found a great passion for cryptocurrency, Web3, NFTs and other digital assets. She spends a lot of time researching and delving deeper into these concepts around the clock, and is a strong advocate for women in STEM.
