Despite being a technological and economic superpower, the United States must catch up in developing its Central Bank Digital Currency (CBDC), a revolutionary digital money developed by countries worldwide. According to Yaya Fanusie, a former CIA officer and cryptocurrency expert, the U.S. risks losing its hold on the global financial system due to its late start in developing its CBDCs.
China Races Ahead with CBDC Development
Yaya Fanusie, the policy director of the Cryptocurrency Council for Innovation, shared his insights on the matter in a recent interview. Fanusie foresees potential risks for the United States if it does not launch its CBDC soon.
He added that a late move could lead to unforeseen geopolitical consequences. Fanusie also suggested that state-issued CBDCs could become a part of the existing global financial infrastructure.
If the U.S. government has limited authority over these new financial standards, it could negatively impact the U.S.’s ability to influence other states economically. However, the U.S. government has not officially endorsed the Federal Reserve’s CBDC initiative.
Fanusie accentuated China’s forerunner head start, highlighting that the nation has been examining CBDCs since 2014 and has made significant progress in adopting the e-CNY, whose pilot test began on Jan.4, 2022. Even so, many have criticized the development of this new technology.
However, Fanusie believes that China is helping other countries embrace similar standards, and there are various trials for smart contracts to give programmability to the CBDC. Moreover, he suggested that the CBDC could be the subject of a hidden “competition” among nations trying to dominate the international stage.
Ripple Uncovers the Obstacles Facing U.S. Central Bankers
Meanwhile, a Ripple report states that if the U.S. central bankers were to create a digital currency. The report added that the key to encouraging consumer usage would be to address any significant impediments to adoption, such as education, security, and privacy.
Ripple reveals that banks may hesitate to replace their lucrative payment services with a CBDC, making widespread adoption difficult without any incentives.
Nevertheless, the Bahamas and Jamaica have implemented rewards for those utilizing CBDCs to purchase local products and services to encourage its adoption. People are also more likely to choose CBDCs over credit cards due to their lower interest rates.
The blockchain tech firm recommends that the government and Federal Reserve take decisive action to foster competition and innovation in the payment system. This could involve lowering settlement fees to limit credit card rewards or establishing uniform bank procedures for CBDC payments and other rapid payment solutions like the FedNow Service.
Furthermore, Ripple cautions that other countries will launch their CBDC pilot programs in the upcoming years, regardless of what the U.S. does. As more people use it and its application becomes clearer, CBDCs will become increasingly advantageous for domestic and international transfers.