A number of central banks around the world have been working on central bank digital currencies (CBDCs), but the U.S. Federal Reserve has been a bit slow on this front. While there hasn’t been any major news regarding the digital dollar recently, things seem to be moving forward.
Michael Greco, director of policy research at the Digital Dollar Project, recently stated that it’s not a matter of “whether“but”when“the establishment of the digital dollar in the United States will take place. Greco’s comments were made during his interview with the program “First Mover” of CoinDesk TV on Tuesday, December 27.
He said the digital dollar could come into being in the next few years, without mentioning the actual timeline. But Michael Greco said the Federal Reserve is waiting for Congress to pass legislation before it can move forward. While he doesn’t expect Congress to pass such legislation next year, Michael Greco believes the conversation will move forward on Capitol Hill, particularly with respect to privacy” in 2023.
Runaway inflation in the U.S. has kept the Fed on its toes and busy focusing on other key macroeconomic factors. Once things appear to be under control, the Fed could probably take a serious look at the digital dollar project.
Nearly 87 countries around the world have begun discussions or pilot projects on CBDCs. Instead, countries like the Bahamas and Nigeria have moved quickly to promote the use of digital currency and reduce the influence of cash in their economies.
And let’s not forget China, which is the leading economy to have launched its digital yuan with a vengeance. The PBoC has developed several ways to promote the use of CBDCs to merchants and consumers.
The United States and other major economies
Although the United States has been a bit slow in developing CBDC, competing democracies are stepping up. Josh Lipsky, senior director of the Atlantic Council’s GeoEconomic Center, recently stated that CBDCs are making “huge leaps” in other parts of the world, such as Europe and South Korea.
In 2023, the European Central Bank is expected to move from the development phase to the pilot phase of the digital euro. This could be a major step given the size of the European Union. He added that U.S. authorities would wait to see how the ECB addresses privacy issues with CBDCs and how they can interact effectively with existing banking systems.
Josh Lipsky also sees greater potential in a wholesale CBDC tailored to bank-to-bank transactions rather than a retail CBDC.