Experts Warn of Risks to the US from Delayed CBDC Development

The slow progress of the United States in the realm of central bank digital currencies (CBDCs) has allowed China, India, and the European Union to take the lead. This conclusion was drawn by analysts at the Atlantic Council.

Over the past year, China has intensified its efforts with digital yuan, the ECB has moved to the preparation stage for launching a digital euro, and in India, commercial banks have begun processing a million transactions a day in digital rupees, the article states.

The organization explained that central banks and legislators in G20 countries have shifted from discussing the theoretical merits and issues associated with CBDCs to actual testing of the technology.

Unlike regulators in other countries, the Federal Reserve has shown caution in advancing pilot projects. Several senior officials at the central bank have expressed skepticism regarding the necessity of CBDCs.

“The position at the Federal Reserve and on Capitol Hill is that the dollar does not need innovation. This is a miscalculation,” the Atlantic Council emphasized.

In January, Democratic presidential candidate Donald Trump promised to block the creation of a digital dollar if elected, calling CBDCs a “dangerous threat to freedom.”

Similar views were expressed by his recent primary opponents, Ron DeSantis and Vivek Ramaswamy.

On January 24, Democratic presidential contender Robert Francis Kennedy Jr. also opposed the digital dollar.

The politician cited China as an example. According to him, in China, the e-CNY is linked to an extensive social credit system, and the government “can cut off” access to funds in cases of “inappropriate” behavior.

Dr. Joseph @Mercola and I discuss financial freedom in the 21st century. As president, I will end the efforts to move toward a CBDC. #Kennedy24 pic.twitter.com/gao3D1HAeM

— Robert F. Kennedy Jr (@RobertKennedyJr) January 24, 2024

“This [CBDC] is a disaster for human rights and civil liberties,” he explained.

Josh Lipsky and Ananya Kumar from the Atlantic Council’s GeoEconomics Center warned that technological innovations in payments at the Federal Reserve are lagging behind competitors. They explained that over 300 specialists work in this area at the People’s Bank of China, whereas the Federal Reserve has fewer than 20.

The organization noted that the Federal Reserve should leverage its influence and take the initiative in setting CBDC standards. The regulator can influence constructive developments regarding the future of national digital currencies and payments overall, the economists indicated.

They noted that creating cross-border systems without Washington and the dollar could complicate the use of the latter in international trade, foreign exchange reserves, and in enforcing sanctions.

“In the absence of more technological models and standards from the US, a fragmented system with various designs, cybersecurity parameters, and messaging systems will be created. […] While many are trying to fill the innovation gap […] no one can replace the issuer of the world’s reserve currency,” the experts pointed out.

The authors of the document urged the Federal Reserve to “do more to accelerate research on payment projects, including faster cross-border transfers and CBDCs.”

“If they do not, the future of money may quickly pass them by,” the experts concluded.

In September 2023, a bill was introduced in Congress to prohibit the Federal Reserve from distributing CBDCs to individuals.