Central Bank Digital Currencies have quickly gained the interest of more and more governments around the world. According to the Atlantic Council's GeoEconomics Tracker, there are currently 102 countries either researching, developing, piloting, or launching their own CBDC's. In 2020, that number stood at 35. Both Covid and Russia's invasion of Ukraine were driving forces that led to the increase in CBDC interest.
CBDC's have either a retail use-case, where consumers can walk into shops and purchase goods, or a wholesale use-case, to help countries easily settle cross-border transactions. Research has shown that interest in wholesale CBDC's has nearly doubled since Russia's invasion of Ukraine following the most sweeping set of sanctions levied against a major economy.
The dollar is involved in nearly 90% of foreign-exchange transactions, but only 60% of cross border transactions are actually denominated in dollars. The dollar is used as a stable intermediary between other currencies to manage risks and costs as cross-border transactions finalize (sometimes after days.) As far as I understand, being able to instantly settle cross-border transactions would remove currency risk and hence the need to have to hold transactions in dollars before they settle.
Do you think CBDC's would be helpful or hurtful for the global economy? What problems do you see arising, and what are some issues they would solve? Lastly, how far off is a financial world dominated by CBDC's and is it a world we even want?
Submitted December 24, 2022 at 01:40AM by werenotthatcool https://ift.tt/gy87Ldz
