CBDC’s and currencies such as Facebook’s Libra could force the U.S. to adapt to save its spot as the world’s leading currency, ING economist Carlo Cocuzzo explained.
As multiple countries and entities weigh the validity of a central bank digital currency the physical United States dollar still sits in a place of dominance — but for how long?
“The dollar is the dominant currency today,” ING economist Carlo Cocuzzo said on a panel at London Blockchain Week. Cocuzzo added that “90% of forex turnover is in dollars, so the U.S. stands to lose in this game.”
A September 2019 report from The Bridge showed similar prominence, with USD tallying 60-70% of foreign exchange reserves.
Countries and companies look to CBDCs with interest
Over the past year, various entities and governments have expressed interest in digital currency issuances.
Facebook threw its hat into the ring in June 2019 with the release of a white paper for Libra, stablecoin to be backed by several currencies and financial products. On the government side, China has visited multiple headlines for its research on a Digital Yuan, a central bank digital currency, or CBDC, for the country.
Cocuzzo sees potential complications ahead
Libra in particular has been the subject of numerous concerns from governing bodies since Facebook released its plans. “That’s an angle where things can get tricky from a dollar perspective,” Cocuzzo said, referring to Facebook’s mention of remittances in relation to Libra.
Cocuzzo also questioned a scenario in which citizens could use non-local currencies as payment. “China could give access to foreign customers to access the digital yuan,” he said, adding:
“How would that affect the dollar in the Forex market? There will definitely be an impact and I don’t think the U.S. central bank will wait and see.”
Since Bitcoin’s creation more than 10 years ago, the asset and its underlying technology have shown the world new avenues for speed and security. As countries and big companies explore the technology, governing bodies will need to adjust to a new system that comes with such changes.