In recent years, many countries around the world have started to develop central bank digital currencies. So far, at least 33 countries, including China, South Korea, Japan, Russia and Thailand, have started the process of developing digital currencies, which also puts the US dollar at risk of being replaced as the dominant global currency.
Michael Novogratz, a prominent US hedge fund manager and former chief investment officer at Fortress Investments, believes that the US will have a significant competitive disadvantage if digital currencies are not introduced soon.
Michael Novogratz says the United States can still control its future for now, but notes that U.S. Treasury Secretary Janet Yellen and Federal Reserve Chairman Colin Powell will have to “unload the supertanker,” referring to the trillions of dollars in monetary and fiscal spending needed to avoid the worst impact of the pandemic.
So, will the United States join in the development of digital currency?
The Biden administration is taking China’s plans for a digital yuan seriously because some officials fear it could be the beginning of a long-term plan to upend the dollar as the world’s dominant reserve currency, Bloomberg reported Wednesday, citing people familiar with the matter.
In response, Fed Chairman Powell said that the Federal Reserve is engaged in a large-scale research and development project on digital dollars, and the question of whether the adoption of such a currency will benefit the public has not been resolved.
“This is a very large, very complex project,” Mr Powell said in an interview last week. It’s about understanding the technology and its feasibility so that you can really address policy issues.”
Millions of Americans already make transactions through the system rather than physical cash, and the Federal Reserve and private banks are pushing for real-time payments.
Countries ranging from China to Sweden are testing digital currencies. Powell said the United States does not need to be first, and noted that any new form of currency would need input from Congress.
But Powell also said the introduction of a digital dollar is actually a “bet” for the United States — that while cash use has fallen sharply in some countries, it is not the case in the United States, where people are as comfortable with cash as ever. So whether to develop digital dollars will depend on the actual situation in the United States.
Fed officials also said they need to consider how digital currencies would interact with the banking system, as most households now keep their money in regulated financial institutions that have deposit insurance and can receive emergency liquidity from the Fed, among others.
In fact, the US federal government has begun to show great interest in the development of digital dollars. Earlier this year, US lawmakers, concerned that the digital yuan would undermine the dollar’s global role, asked the Federal Reserve and the US Treasury for more information, according to the report, according to people familiar with the matter.