Why hasn't the US fully embraced the digital dollar? - Tearsheet (2024)
While many countries worldwide are exploring the potential of Central Bank Digital Currency (CBDC), China continues to expand its e-CNY in the market. China introduced its CBDC to the world at the Olympic Games in February 2022. For its part, the US Federal Reserve is conducting research and strategic planning regarding the potential implementation of CBDCs, spurred on by Biden’s executive order. Despite these efforts, America has yet to make a concrete commitment to adopting a digital dollar.
In the US, the CBDC would be a third form of the US Dollar after paper and coins. CBDCs are considered fiat currencies of a particular nation (or region) that are issued by – and regulated by – the overarching monetary authority of that country. Each CBDC is backed by the government that issued it and is part of the base money supply. The US Constitution determines what Congress can and cannot do to create and weigh money, and the Digital Dollar would be under that legal definition.
I spoke with Lisa Pollina, Board Member, Atlantic Council of the United States, about the hurdles in CBDC adoption, weighing the pros and cons. We also touched on China’s CBDC prevalence versus US interest in cryptocurrencies.
While CBDCs promise to significantly improve the cost and speed of international payments, their development also presents an opportunity for states to reduce reliance on the U.S. dollar. The United States has enjoyed many benefits from the dollar's preeminence global currency.
The concern is that financial privacy will be lost with a digital dollar. The government would be able to watch how people spend their money, close their bank accounts, or even just take the money. In other words, the worry is that a digital dollar would be one more way for the government to control us and our money.
Critics claim the digital dollar, or any form of digital currency, would have major privacy and security concerns and could give the government unprecedented access to Americans' financial data. Digital currencies may also be more susceptible to cyberattacks or hacking than traditional payment methods.
Pollina even lays out the advantages of a digital dollar, such as unbanked access, fraud resistance and quicker payments. There are many ongoing privacy and security risks, cyber threats and surveillance. The U.S. dollar may have to get up from its seat as the world's reserve currency as CBDCs step in.
Introduction: My name is Trent Wehner, I am a talented, brainy, zealous, light, funny, gleaming, attractive person who loves writing and wants to share my knowledge and understanding with you.
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