A comprehensive study released on Thursday, March 14th, 2024, by the US-based Atlantic Council think tank reveals a significant global trend toward the exploration and development of digital currencies. The study found that 134 countries, representing 98% of the global economy, are actively engaged in exploring digital versions of their currencies.
Of these nations, more than half have advanced to various stages of development, pilot testing, or even launching digital currencies, indicating a widespread acceptance and adoption of digital currencies on a global scale. Notably, most G20 countries are making significant progress in their digital currency initiatives, with only Argentina lagging behind.
However, the report highlights a concerning trend for the United States, as it appears to be falling behind in the development of digital currencies compared to its G20 counterparts. While the US has made some progress in exploring a “wholesale” digital dollar for use by banks, efforts to create a digital currency accessible to the broader population seem to have stalled.
The Federal Reserve Chairman’s Statement:
Federal Reserve Chairman Jerome Powell’s recent statement, emphasizing that the implementation of a retail digital dollar is not imminent, highlights the significant hurdles facing the United States in the realm of digital currencies. Despite President Joe Biden’s directive in 2022 to explore the concept of a digital dollar, progress has been slow and hindered by political divisions. Notably, Donald Trump, Biden’s opponent in the upcoming election, has adamantly opposed the idea of implementing a digital dollar.
Josh Lipsky of the Atlantic Council has drawn attention to the widening gap between major central banks, with China, Europe, and Japan making substantial strides in the development of central bank digital currencies (CBDCs). China’s digital yuan, in particular, has emerged as a frontrunner, with extensive pilot programs conducted across various sectors, including public transportation ticketing and transactions related to COVID-19.
The Rapid Global Adoption of CBDCs:
While advocates tout the benefits of digital currencies, including enhanced functionalities and an alternative to physical cash, concerns regarding government surveillance have ignited protests in various nations. The swift global adoption of central bank digital currencies (CBDCs) could potentially result in a fractured international payments infrastructure. Failure by the United States to keep pace with evolving standards may lead to a decline in its global financial influence.
The report also underscores a surge in cross-border wholesale CBDC initiatives, with thirteen projects currently in progress. Examples include the “mBridge,” which links China, Thailand, the UAE, and Hong Kong. These endeavors signify a growing inclination towards alternative payment systems beyond the traditional dominance of the US dollar.
Leading economies such as those within the BRICS bloc, along with the European Central Bank, are poised to spearhead CBDC launches by 2027, potentially reshaping the global financial landscape.