CBDCs, which are digital versions of its fiat money
According to Yaya Fanusie, a cryptocurrency researcher and former CIA analyst, the United States' slow start in developing it's Central Bank Digital Currency (CBDC) may lead to the country losing control of the global financial system.
Fanusie believes that states facing sanctions are seeking financial infrastructure that is not influenced by the U.S. This may cause geopolitical implications if the U.S. continues to lag behind on CBDC adoption and fails to influence the new global standards that are being created.
Fanusie believes that state-issued CBDCs could be a part of this infrastructure, and if the U.S. has little influence over it, then it could impact the country's economic statecraft. While Fanusie doesn't believe that the Chinese-led CBDC movement will replace the U.S. dollar, he thinks it could cause significant geopolitical headaches.
The quote highlights: “The potential vulnerability of the U.S. sanctions power if there were to be a shift away from the centrality of the U.S. in the global financial infrastructure. The development of a viable alternative rail for transactions by sanctioned actors could pose a challenge to the effectiveness of U.S. sanctions.”
The U.S. Federal Reserve's progress on its CBDC (Central Bank Digital Currency) project, the Digital Dollar Project, could potentially be significant in this regard. A CBDC would be a digital version of a country's fiat currency and could potentially be used for transactions and payments without the need for intermediaries such as banks.
If the U.S. were to develop and widely adopt a digital dollar, it could strengthen its position in the global financial infrastructure and potentially reduce the risk of a shift away from its centrality. However, it remains to be seen how successful the Digital Dollar Project will be and whether it will be adopted widely enough to have a significant impact on the global financial landscape.
China has been leading the way in the development of CBDCs, having launched the pilot version of its digital yuan(e-CNY) on Jan. 4, 2022, earlier this year. With millions of transactions already processed, China has gained a first-mover advantage in this area.
In addition, China is also testing smart contracts to add programmability to the CBDC and is even helping other countries adopt similar standards. This could potentially reshape the global financial landscape, making it more important than ever for other countries, including the U.S., to keep up with these developments.
Central Bank Digital Currencies (CBDCs) are becoming an increasingly hot topic in the world of finance and geopolitics. As countries around the world explore the potential benefits and drawbacks of launching their own digital currencies, there are concerns that an unspoken "race" is taking place, with nations competing to gain geopolitical advantage.
While some commentators have suggested that China's CBDC ambitions are purely focused on domestic dominance rather than trying to beat the U.S. dollar, there are concerns that other countries may be looking to gain an edge on the global stage by launching their own digital currencies.
CBDCs are run on state-controlled ledgers, which are believed to be more efficient and user-friendly than decentralized public networks like Bitcoin and Ethereum. However, some opponents of CBDCs worry that states are adopting blockchain-powered digital currencies in order to maintain greater control over their citizens.
In the U.S., there has been pushback against the idea of a CBDC, with some lawmakers arguing that it could be used to undermine the financial privacy of American citizens. Congressman Tom Emmer recently introduced the cbdc anti-surveillance state act, which aims to protect the financial privacy of U.S. citizens from actions by the Federal Reserve.
As the debate around CBDCs continues to evolve, it is clear that they have the potential to fundamentally change the way we think about money and finance. While there are concerns about the potential downsides of CBDCs, there are also many who believe that they could offer significant benefits in terms of efficiency, security, and financial inclusion.
Also read - February Sees Decrease in Crypto Job Losses, With Only 570 Layoffs
