A cryptocurrency researcher and former CIA analyst believes that the United States government’s slow start on the development of Central Bank Digital Currency (CBDC) could lead to a loss of control of the global financial system.
Yaya Fanusie, head of policy at the crypto advocacy group Crypto Council for Innovation explained in an interview on February 28 in Bloomberg that sanctioned countries are trying to transact on financial infrastructure that is not controlled or heavily influenced by the US in order to move funds. more freely across borders.
If the US continues to sit “on the sidelines” and lag behind in the adoption of CBDC, Fanusie believes that this could cause “problems” and lead to “geopolitical implications” that are not expected in time:
Fanusie explained that state-issued CBDCs could be part of this financial infrastructure that is adopted globally, and that if the US does not have an impact on the new standard, then this “affects the state of the US economy.”
“The potential power of our sanctions comes from the center of the US to the financial global infrastructure. So if there is a little change, this does not mean that China will take over or that the yuan will replace the dollar, but if there is a new rail that the sanctioned actors can now do transaction, hence the problem.
The US Federal Reserve, however, recently made progress on the CBDC – Digital Dollar Project – after releasing the latest version of its whitepaper on January 18:
Today we are proud to release the 2023 DDP white paper update in which we revisit our proposed “championship model” in 2020, provide recommendations for the US government and the private sector and look forward to the next phase in #CBDC development @giancarloMKTS https://t.co/bX5u4zfqMc pic.twitter.com/si2joxbkq9
— The Digital Dollar Project (@Digital_Dollar_) January 18, 2023
However, the Federal Reserve has not yet received approval from the US government to proceed with the CBDC project.
Fanusie emphasized that China has benefited from the almost first mover advantage, having explored the CBDC since 2014 and launching a pilot version of the digital yuan (e-CNY) on January 4, 2022, which Fanusie said has processed “millions of transactions” across “millions -million wallet” so far.
Fanusie added that there is a “pilot set” testing smart contracts to add programmability to the CBDC and that China is helping other countries adopt similar standards.
He added that there may be an unspoken “race” on the CBDC border as countries seek to gain a geopolitical edge.
“It happens whether we like it or not.”
However, previous commentators on the CBDC race between China and the US have argued that China’s CBDC ambitions are only about domestic dominance rather than trying to beat the US dollar.
related: What are CBDCs? A beginner’s guide to central bank digital currencies
CBDC runs on a state-controlled ledger, which is reportedly more efficient and easier to use in some cases than decentralized public networks, such as Bitcoin and Ethereum.
However, some opponents of CBDC believe that countries use blockchain-backed CBDCs to maintain a level of financial control over their citizens.
Part of the pushback in the US recently came from pro-crypto 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:
Today, I am introducing the CBDC Anti-Surveillance State Act to prevent efforts by unelected bureaucrats in Washington, DC from taking away Americans’ right to financial privacy. pic.twitter.com/lONbHFZMk7
– Tom Emmer (@GOPMajorityWhip) February 22, 2023