The Atlantic Council, a prominent think tank, has issued a warning that the United States is falling behind its global peers on the development of central bank digital currencies (CBDCs), which could have serious implications for the future of money. They aim to provide a fast, secure, and cost-effective way of transferring value while preserving the stability and sovereignty of the existing monetary system.
Several countries have been actively pursuing CBDC projects with varying degrees of progress and ambition. China, for instance, has been testing its digital yuan in several cities and regions and plans to use it for the 2022 Winter Olympics. The European Central Bank (ECB) has launched a preparatory phase for a digital euro, which could take up to five years to complete. India, meanwhile, has seen a surge in digital rupee transactions as commercial banks offer the service to their customers.
The US, however, has been slow and cautious in its approach to CBDCs. The Federal Reserve has only recently announced that it will launch a pilot program this year and has not committed to a timeline or a design for a digital dollar. Several Fed officials have also expressed doubts about the need and the benefits of a CBDC, citing potential risks to financial stability, privacy, and security.
This month, former President Donald Trump, who is running for re-election, declared that he would “never allow” the creation of a digital dollar, calling it a “dangerous threat to freedom”. He claimed that a CBDC would give the government too much power over people’s finances and that it would undermine the strength and dominance of the US dollar.
Think Tank Pushes Fed For CBDC Acceleration
The Atlantic Council’s GeoEconomics Centre, led by Josh Lipsky and Ananya Kumar, has published a report urging the Fed to accelerate its efforts on CBDCs and other payment innovations, warning that the US could lose its leadership and influence in the global financial system if it does not act fast.
The report argues that the Fed should seize the opportunity to set standards and shape the development of CBDCs and payments, both domestically and internationally. It notes that central bankers worldwide are looking for the Fed’s guidance and collaboration on these issues and that the US has a unique chance to promote its values and interests through CBDCs.
The report also points out that the US is lagging behind not only on CBDCs but also on improving cross-border payments and implementing FedNow, a real-time payment service that the Fed plans to launch in 2023. It calls on the Fed to do more to explore and advance these projects and to engage with the public and private sectors on their benefits and challenges.
The report concludes that the future of money is changing rapidly and that the US cannot afford to be complacent or resistant to change. It warns that “if they don’t, the future of money may quickly pass them by”.
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