Digital dollars and digital currencies from the various central banks are becoming a reality faster and faster. China is reportedly expanding a pilot program for its digital yuan this month.
The US has only thought about a digital dollar so far, which has only led to widespread debate about its possible impact; among others with ex-governor of the Reserve Bank of India, Raghuram Rajan. “Bitcoin and Facebook’s cryptocurrency, Libra, could ultimately compete with future digital central currencies,” said Rajan, who served as chief economist for the International Monetary Fund before taking over the top position at India’s central bank, told CNBC’s Beyond the Valley podcast. Central bank digital currencies, sometimes referred to as CBDCs, are expected to function just like regular coins and notes issued by central banks. However, they exist entirely online, with the US Federal Reserve potentially issuing digital dollars through Fed accounts.
The race to create a working digital currency…
…by central banks was triggered by Facebook’s announcement of the Libra cryptocurrency last year. However, the social media giant was forced to curtail its ambitious plans after central bank governors around the world vehemently objected to the idea.