US backlog on CBDCs could mean ‘trouble’ – Crypto Council Policy Director
A cryptocurrency researcher and former CIA analyst believes the US government’s relatively slow start to the development of Central Bank Digital Currency (CBDC) could cause it to lose its grip on controlling the global financial system.
Yaya Fanusie, the head of policy at the crypto advocacy group Crypto Council for Innovation, explained in a Bloomberg interview on February 28 that sanctioned states want to act on financial infrastructure that is not controlled or heavily influenced by the United States to move funds more freely across borders.
If the US continues to sit on the “sidelines” and lag behind on CBDC adoption, Fanusie believes this could create “trouble” and cause unforeseen “geopolitical implications” over time:
Fanusie explained that government-issued CBDCs could be part of this financial infrastructure being adopted globally, and that if the United States has little influence over these new standards, then “this affects the state-economic statecraft of the United States.”
“The strength of our sanctions power comes from the centrality of the United States to the financial global infrastructure. So if that changes a little bit, it doesn’t mean China is going to take over or the yuan is going to displace the dollar, but if there is a viable new railway there sanctioned actors can now act, there are problems.”
However, the US central bank has recently made progress with its CBDC – Digital Dollar Project – after releasing the latest version of its whitepaper on January 18:
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 a near-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” over “millions of wallets” so far.
Fanusie added that there is a “series of pilots” testing smart contracts to add programmability to the CBDC, and that China is helping other countries adopt similar standards.
He added that there is possibly an unspoken “race” going on in the CBDC border as nations look to gain a geopolitical advantage.
“It happens 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.
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 to maintain a degree of financial control over citizens.
Part of the backlash in the US recently came from crypto-pro-US Congressman Tom Emmer, who recently introduced the CBDC Anti-Surveillance State Act in an effort to protect the financial privacy of US citizens from actions by the Federal Reserve:
