Yaya Fanusie, a cryptocurrency researcher and former CIA analyst, believes that the US government’s relative slowness in developing its central bank digital currency (CBDC) may cause it to lose its grip on the global financial system.
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Fanusie, policy officer at cryptocurrency advocacy group Crypto Council for Innovation, explained in an interview with Bloomberg on Feb. 28 that sanctioned states seek to transact in financial infrastructures that are not controlled or heavily influenced by the US to move funds more freely across borders.
Fanusie explained that state-issued CBDCs could form part of the financial infrastructure being adopted globally. If the US has little influence over these new rules, “it will affect US economic policy.”
If the US continues to stay “on the sidelines” and lags behind in adopting CBDCs, Fanusie believes this could spell “trouble” and cause unforeseen “geopolitical implications” over time:
“The power of our sanctions lies in the centrality of the United States in the global financial infrastructure. So if that changes a bit, it doesn’t mean that China is going to take over or that the yuan is going to displace the dollar, but if there is a viable new lane that sanctioned players can now transact on, that’s a problem. ”
However, the Federal Reserve has not received approval from the US government to go ahead with the CBDC project.
Fanusie highlighted that China has enjoyed a near-first advantage, having explored CBDCs since 2014 and launching the pilot version of its digital yuan on January 4, 2022, which Fanusie says has processed “millions of transactions” over through “millions of wallets“, until now.
Fanusie added that there are a “series of pilot projects” 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 “rush” taking place on the CBDC border, as nations seek to gain geopolitical advantage.
“That is happening, whether we like it or not.”
However, previous commentators on the China-US CBDC race have said that China’s CBDC ambition is purely about domestic dominance rather than trying to beat the US dollar.
CBDCs that run on state-controlled ledgers are said to be more efficient and user-friendly in some cases than decentralized public networks, such as Bitcoin and Ethereum.
However, some opponents of CBDCs believe that states adopt them to maintain some degree of financial control over their citizens.