the Fed officials positioned digital currencies as one of the potential threats to the dollar’s global dominance in the world financial system.
In the the article “The International Role of the U.S. dollar” the heads of the Federal Reserve’s International Finance Department noted that over the past two decades dollar usage worldwide has remained stable. In their view, nothing threatens the dollar’s hegemony in the near term.
In the longer term, experts named three potential rivals: the euro, the Chinese yuan, and digital currencies.
Regarding the latter, Fed officials wrote:
“The changing payment landscape could also pose a challenge to dollar dominance. For example, rapid growth of digital currencies, both private and official, could reduce dependence on the U.S. dollar.”
However, they considered it unlikely that technology alone could sufficiently offset the long-standing reasons for the dollar’s dominance.
“Overall, in the absence of any large-scale political or economic changes that would harm the dollar as a store of value or medium of exchange and simultaneously raise the attractiveness of alternatives, the U.S. currency is likely to remain dominant in the world in the foreseeable future,” — the experts concluded.
In 2020, the regulator conducted research into issuing a digital dollar. In April 2021, the head of the institution, Jerome Powell, confirmed.
In his view, the issuance of the Fed’s digital currency would undermine Bitcoin’s popularity, which the regulator does not intend to ban, as well as other crypto assets.