Washington Warned: Launch Digital Fiat or Say Goodbye to USD Dominance
A group pushing for the United States to adopt a digital dollar has warned that failure to launch a central bank digital currency (CBDC) could cost the country dear – and could see the USD lose its status as the world’s reserve currency.
In its first white paper, the Digital Dollar Project wrote,
“If the USD is to remain the world’s primary reserve currency in the unfolding century, it cannot remain an analog instrument and unit of account for things increasingly denominated as digital tokens. It must itself become a digital tokenized currency that measures, supports and transacts with the world’s digital tokenized things of value.”
The group was formed earlier this year. It is headed by Christopher Giancarlo, the former head of the country’s top financial regulator, the Commodity Futures Trading Commission (CFTC), and is being run in coordination with Accenture. Daniel Gorfine, the CEO of Gattaca Horizons and the CFTC’s former Chief Innovation Officer is part of the group’s management committee.
The white paper includes a number of reasons why the group thinks that there is a need for the Federal Reserve to launch a CBDC, and seeks to outline ways in which the USA might seek to launch a digital dollar.
A growing number of American financial experts and politicians have urged the Fed to act fast, or watch projects like China’s digital yuan – already being used in advanced multi-city pilots – potentially chip away at dollar dominance.
Indeed, a number of reports have claimed that Beijing’s apparent desire to fast-track the digital yuan – known in China as the DCEP – is part of a wider plan to chip away at the greenback’s control of worldwide financial markets.
The white paper’s authors warned,
“If payment systems could bypass Western banks heavily linked economically and geopolitically to USD reserves, the effectiveness of economic sanctions as a central and unifying tool of our foreign policy would be at serious risk. It would mean United States global leadership, particularly in the exercise of soft power, would be at risk as well.”
The group enthused about the potential of an American CBDC, writing,
“[The project] could offer broader access to USD, reduced operational complexities, improved cost efficiencies, greater market transparency, reduced counterparty risk and increased trade liquidity.”
It also claimed that a digital fiat would speed up trade deals and “allow money to flow more efficiently through domestic and global economies.”
And the group went on to suggest that the government could use the digital dollar to provide emergency relief through agencies at a faster rate than ever – helping ease the economic fallout of disasters such as the coronavirus pandemic.
The authors concluded that a digital greenback could be used for Peer-to-Peer (P2P) payments, remittances, cross-border deals, B2B deals and could even boost retail spending – which is expected to plummet in the wake of the pandemic.