A cryptocurrency researcher and former CIA analyst believes that the United States government’s relatively slow start in developing Central Bank Digital Currency (CBDC) could result in it losing control of the global financial system.
Yaya Fanusie, head of policy at crypto advocacy group the Crypto Council for Innovation, explained in an interview with Bloomberg on Feb. move cross-border funds more freely.
If the US remains “on the sidelines” and falls behind in CBDC adoption, Fanusie believes it could spell “trouble” and cause unforeseen “geopolitical implications” over time:
Fanusie explained that state-issued CBDCs can be part of this financial infrastructure that becomes adopted globally, and that if the US has little influence over these new standards, it will “impact US state economic policy.”
“The strength of our sanctions power comes from the centrality of the US to the global financial infrastructure. So if that changes even a little bit, it doesn’t mean that China will take over or that the yuan will replace the dollar, but if there’s a new viable railroad where sanctioned actors can now trade, that’s a problem.
However, the US Federal Reserve has recently made progress on its CBDC – the Digital Dollar Project – having released the latest version of its whitepaper on January 18th:
Today, we are proud to release the DDP’s 2023 white paper update, where we revisit our proposed 2020 “champion model”, provide recommendations to the US government and private sector, and look to the next step in #CBDC developments @giancarloMKTS https://t.co/bX5u4zfqMc pic.twitter.com/si2joxbkq9
— The Digital Dollar Project (@Digital_Dollar_) January 18, 2023
However, the Federal Reserve has not received approval from the US government to proceed with the CBDC project.
Fanusie highlighted that China has benefited from an almost first-mover advantage, having explored CBDCs since 2014 and launching the pilot version of its digital yuan (e-CNY) on January 4, 2022, which Fanusie says has processed “millions of transactions” in “millions of wallets” so far.
Fanusie added that there is a “pool of pilots” testing smart contracts to add programmability to CBDC and that China is helping other countries adopt similar standards.
He added that there is possibly an unspoken “race” going on across the CBDC border as nations seek to gain a geopolitical advantage.
“This is happening whether we like it or not.”
However, previous commentators on the CBDC race between China and the US have said that China’s CBDC ambition is purely about domestic dominance rather than trying to beat the US dollar.
Related: What are CBDCs? A Beginner’s Guide to Central Bank Digital Currencies
CBDCs run on state-controlled ledgers, which are reported to be more efficient and easier to use in some cases than decentralized public networks such as Bitcoin and Ethereum.
However, some opponents of CBDCs believe that states are adopting blockchain-powered CBDCs in order to maintain a degree of financial control over their citizens.
Some of the resistance in the US has recently come from pro-crypto US Congressman Tom Emmer, who recently introduced the CBDC State Anti-Surveillance Act in an effort to protect the financial privacy of US citizens from actions by the Federal Reserve:
Today, I introduced the CBDC Anti-Surveillance State Act to stop efforts by unelected bureaucrats in Washington, DC to deprive Americans of their right to financial privacy. pic.twitter.com/lONbHFZMk7
— Tom Emmer (@GOPMajorityWhip) February 22, 2023