At the Federal Reserve’s first conference on the international role of the dollar, the prospect of a US central bank digital currency did not particularly impress panelists.
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According to a July 5 write-up on the June conference, a panel focused on digital assets found that institutional investment in crypto is “constrained by the lack of a regulatory framework.” Meanwhile, a Fed-issued CBDC — a particularly hot topic in Congress at the moment — or alternatives underwhelmed.
“Panelists generally agreed that technology by itself would not lead to drastic changes in the global currency ecosystem, as other factors such as the rule of law, stability, network effects, and the depth of markets are crucial for the advantages held by dominant currencies,” the Fed’s summary said.
The write-up also downplayed the risks that foreign currencies, especially the Chinese renminbi, or digital assets pose to the dollar in the international sphere, calling “the scope of cross-border CBDCs still quite limited.” Indeed, the report of the conference points to research that suggests a major market for Bitcoin comes from efforts to evade capital controls, particularly China’s stringent regime.
China’s ambitions for an international role for the renminbi have caused a great deal of concern among certain commentators and policymakers in the US, which draws a great deal of international leverage from the dollar’s role as the global reserve asset. The digital RMB is the largest-scale CBDC operation in the world right now, but seems to have been more an effort to compete local payments platforms like AliPay and WeChat Pay than foreign currencies up to this point.
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