One of the most prominent topics this year has been Central Bank-issued Digital Currencies (CBDCs). These would represent the digital version of currently used fiat currencies. They should not be mistaken for decentralised cryptocurrencies such as Bitcoin as CBDCs would remain centrally-issued.
A large number of countries have already expressed their intentions to issue their own CBDCs, such as France, China, Sweden and many others. China is perhaps advancing the fastest today as they have reached the testing phase.
While the idea was always present, the recent acceleration was ignited when Facebook announced their plans to launch their digital currency project: Libra. Facebook has a global reach in the billions of individuals, more than any singular country which poses a sovereignty problem.
The United States
Out of all fiat currencies, the current world reserve currency is the US dollar. Jerome Powell, chairman of the Federal Reserve (US Central Bank) has expressed that they are evaluating the potential benefits of issuing a CBDC during a meeting at the IMF.
Of course, this would increase efficiency which would especially be true for cross-border payments but also to address the underserved population by the financial services industry. With all innovation comes risk which is a main point they are focusing on according to Powell, to ensure they remain as contained as possible.
Unlike the tone taken by multiple Central Banks around the world, Powell stated: “I think it’s more important for the United States to get it right than it is to be first”.