As US wades into digital currency arena, China’s e-yuan already has a big head start
- US central bank says a digital sovereign currency would support the US dollar’s international role, as its dominance in global payments is already being challenged
- Federal Reserve is soliciting public comments until May 20, marking the US’ first foray into the sovereign digital currency arena
The US central bank has voiced concerns that central bank digital currencies (CBDCs) could weaken America’s dominance in the global financial system, while calling for more research and public support.
In its first-ever research report on a potential US digital currency, titled “Money and Payments: The US Dollar in the Age of Digital Transformation”, the US Federal Reserve said a digital dollar would best serve the US’ needs by being privacy-protected, intermediated, widely transferable and identity-verified.
One of the key benefits listed in the Fed’s discussion paper is the potential support for the US dollar’s international role, but the Fed will not proceed without clear support from the executive branch and from Congress, ideally in the form of a law.
“It is important, however, to consider the implications of a potential future state in which many foreign countries and currency unions may have introduced CBDCs,” the report said. “Some have suggested that, if these new CBDCs were more attractive than existing forms of the US dollar, global use of the dollar could decrease – and a US CBDC might help preserve the international role of the dollar.”