US Digital Dollar – Will It Become a Cryptocurrency?

US Digital Dollar - Will It Become a Cryptocurrency?The world has entered a phase, where the concept of real money is changing. The process started with the appearance of cryptocurrencies and the trend shows no signs of slowing down. Even after the emergence of Bitcoin, in recent years, countries have contemplated creating CBDC (central bank digital currency). More and more states are looking forward to this opportunity.

The digital dollar has become one of the most discussed subjects. No wonder, because USD is a dominant currency compared to the other ones. Some even believe that it is destined to become a cryptocurrency. Let’s have a look at this topic thoroughly and perspectives of the digital dollar.

Brief History

The US Federal Reserve plans to start exploring the benefits and risks of issuing a US digital currency a long time ago. However, it should also be noted that the opinions of the officials about creating the digital dollar vary. There are many reasons and we can have a look at both defenders and opponents of the CBDC.

Defenders of Digital Dollar

Those who support the idea say that the digital dollar will accelerate the turnover of funds and attract more people who do not have bank accounts in the process. However, the main incentive for the launch of the digital dollar is the desire of the United States to keep up with other countries, which are already preparing for the introduction of CBDC.

Supporters of the digital dollar also think that it will be a completely new page in the world of trading. As FX is becoming more and more popular, with the number of investors growing every year, Forex trading for beginners is gaining momentum. Novice investors and especially youngsters prefer this activity to traditional investment methods. With that being said, the digital dollar will only act as a substitute for traditional currencies.

We can also recall that in the UK they announced that PayPal, Visa and Amazon will work on the digital pound. Earlier, the creation of CBDC was announced in New Zealand, Spain, Israel and other countries.

Opponents of the digital dollar

Fed Chairman Jerome Powell stressed that there are drawbacks to the idea of ​​introducing the electronic dollar. He said that Americans prefer cash and if the digital dollar is introduced, the authorities will be able to check any movement of money, which reduces privacy.

China and Its Role to Challenge Digital USD

China may try to reduce the role of the dollar in the world with the digital yuan. The dollar will cease to be the main currency for international trade, for the accumulation of reserves, and the United States will not be able to impose sanctions against countries it does not like. Such a prospect is possible, experts say, but they assume that not all countries will support the strengthening of China in the foreign exchange market.

The dollar’s leadership in financial markets could end faster than predicted, this worries the US administration and it is stepping up monitoring of China’s plans to introduce a digital currency.

The White House intends to understand “what the consequences may be” from the use of this currency. The Treasury, the State Department, the Pentagon and the US National Security Council have stepped up efforts to assess the impact of the digital yuan.

The authorities’ fears are based on the fact that the sovereign digital yuan could become one of the links in the chain in the PRC’s attempts to deprive the dollar of its role as the main reserve currency in the world.

So far, the White House is not going to somehow counter the “threats from China’s digital currency”, but is considering whether the digital yuan will allow it to bypass US sanctions. Provided that China will be the first of the technology leaders to create a digital yuan and launch it into global circulation.

According to interlocutors of the agency, the administration of President Joe Biden and the US Congress are showing more interest in creating a digital dollar. Earlier, US Treasury Secretary Janet Yellen said that the digital equivalent of the dollar could be useful to improve the access of low-income families to financial services.

Digital USD Will not be a Crypto

It seems highly unlikely that the digital dollar will be in any form a new cryptocurrency. Cryptos enjoy a wide range of advantages, such as anonymity, privacy which is not the case with digital currencies. They can be tracked. The control mechanisms are broader than in the case of cryptocurrencies. However it is still some time before the digital currency is issued.

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