Digital Yuan, eNaira to DCash, crypto revolution spurs cbanks to design money’s future
When the U.S. and its allies decided to punish Russia for its invasion of Ukraine, they used their power over the global financial system to isolate the nation, crippling its economy and crushing the value of the ruble. But what if, in the future, countries don’t need those U.S.-dominated payment networks?
That’s one of the big questions also being asked now about China’s digital yuan and the European Central Bank’s plans for a digital euro, just two of the many so-called central bank digital currencies (CBDCs) that are being tested or studied around the world. CBDCs have emerged amid the rise of thousands of cryptocurrencies, which are quickly disrupting traditional payment systems and pushing central bankers to innovate to compete.
It’s not the first time. Consumers and businesses used to transact in numerous privately issued banknotes until central banks ended the chaos by monopolizing currency issuance in the 19th and early 20th century. Today, policymakers face a similar challenge of trying to maintain their footprint in global money supply.
CBDCs aim to make payment systems safer, faster, cheaper, and more reliable. Digital money also can give governments in poor nations an alternative to underdeveloped banking systems or help authorities provide lifesaving funds to citizens quickly during a crisis.
The International Monetary Fund estimates that about 100 countries have either rolled out CBDCs or are considering them. The U.S. is among those with a project that’s still on the drawing board, though an executive order by President Joe Biden in March sought to prioritize the study of a digital dollar.
But isn’t money already digital? For most of us, our savings or debts are just numbers on a computer or smartphone screen.
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