The US and the Fed are changing their views on digital currencies. Recently, the US has expressed the highest support so far for the development of a central bank digital currency (CBDC). For the US, the digital dollar project is now a project of the highest priority.
Why it matters
The establishment of a central bank digital currency, or CBDC, could be a major step towards digitizing the world. More and more consumers and financial institutions are using more digital payments. This puts a lot of pressure on policymakers to secure the positio of the US dollar as a reserve currency in the digital world as well. The US must therefore take steps to maintain the position of its currency. One of the possibilities is the use of CBDC. Such a step would be a huge challenge for Fed.
What you can hear
Many people in America do not have access to simple payment systems and bank accounts. As the new Finance Minister Janet Yellen said, the digital dollar could help with this problem. Cash accounted for only 20.5% of all global payments in the store. According to a report by the financial company FIS, this is a decrease by almost one third since 2019. Thus, a further decrease in the use of cash is expected. Furthermore, the pandemic accelerated the process of a decline of cash use.
What it could mean
The transition to digital currency could help to some extent a part of the population access to a bank account, which could only be a digital wallet on the phone. On the other hand, it will be needed to maintain both forms of the financial system, at least for a transitional period, even for people who cannot work with a telephone or refuse technology. It will definitely be a challenge for both the US and the Fed to create a system that can work on all platforms and versions of the operating system, while keeping banknotes long enough for those who do not have access to or don’t want to use a smartphone.
What you can do
It is always better to be prepared. If you want to learn more about digital currencies, you can start with the study videos prepared for you by our Platon Trading Academy. There you will learn everything about finances and their alternatives.