US Trails China In The Digital Currency Race. Here's Why

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Over 100 countries are currently exploring Central Bank Digital Currencies

Over 100 countries are currently exploring Central Bank Digital Currencies (CBDCs), representing at least 95 per cent of the global economy.

CBDCs are the digital version of an official currency. A CBDC may or may not be backed by blockchain technology, but it offers a ‘sovereign guarantee' that crypto will not. However, like cryptos, a CBDC is expected to facilitate trust, safety, and liquidity. 

According to a recent Deloitte report, the Asia Pacific region has been the “frontrunners” in CBDC projects. “Seven out of the top 10 CBDC projects are being conducted in the APAC region alone,” it noted.

China became the first major economy to launch a digital currency in 2021, while several developing countries are in various stages of experimentation. 

As much as CBDC adoption is the story of developing countries gaining the first-mover advantage, it is also the story of at least one economic powerhouse missing out – the United States. 

The US came out with its first comprehensive framework on digital assets (read CBDCs) in September 2022.

While analysing the benefits and downsides of a US CBDC, the reports urged the Federal Reserve “to continue its ongoing CBDC research, experimentation, and evaluation.” 

On November 15, the New York Fed announced the launch of a proof-of-concept pilot project to see the feasibility of a CBDC, just days after releasing the results of its wholesale CBDC research titled ‘Project Cedar'. 

The US' tryst with CBDCs came a fortnight after India's central bank began its pilot in the government securities market. 

India is expected to launch a pilot retail version of CBDC in December, while the United States is still in the research