The idea of the digital dollar is still in the air as there seems no preparation to roll out digital currency in the near future. The senior analysts of the US largest bank say that the geopolitical supremacy of the US is in danger due to the rising trend of digital currencies.
On May 22, Bloomberg reported the warning given by analysts at JPMorgan Chase, the largest bank of the US. Josh Younger, the head of U.S. interest-rate derivatives strategy, and Michael Feroli, the chief US economist stated:
“There is no country with more to lose from the disruptive potential of digital currency than the United States.”
They further talk about how the U.S. dollar hegemony will affect from the disruptive potential of CBDC (Central Bank Digital Currency). According to the analysts at JPMorgan Chase & Co:
“This revolves primarily around U.S. dollar hegemony. Issuing the global reserve currency and the medium of exchange for international trade in commodities, goods, and services conveys immense advantages.”
US could lose Power over SWIFT and Global Trade Settlement
The emergence of digital currency gives rise to many concerns about whether the US is losing its geopolitical authority in the world. JPMorgan points out the fact that the US needs to focus on blockchain-based currency, otherwise, it will risk its dominance as a geopolitical power. Specifically, the analysts believe that the US could lose grip over the SWIFT messaging system and trade settlement. European Union also wants to remove the dominance of the US over the global payment system.
JPMorgan’s analysts stated:
“Offering a cross-border payments solution built on top of a digital dollar would, particularly if designed to be minimally disruptive to the structure of the domestic financial system, be a very modest investment to protect a key means to project power in the global economy.”
“For high-income countries and the U.S. in particular, digital currency is an exercise in geopolitical risk management,” they added.
Recently, the central bank of France completed the first trial of digital euro successfully. They enabled digital euro to settle securities instead of the traditional manner of payment.
China is also on the mainstream to launch its CBDC and is currently testing its potential in four pilot cities of the country.