A Digital Dollar? Here’s How We Start

United States President Joseph R. Biden’s recent Executive Order directing a whole-of-government effort to understand and evaluate the benefits and risks of a U.S. central bank digital currency (CBDC) represents a watershed moment years in the making. But what brought us to this point, and what comes next?

According to a recent Bank for International Settlements (BIS) survey, the value of a CBDC for an increasingly digital world has gained traction with 90% of the world’s central banks engaging in research or experimentation toward developing a central bank digital currency. You can now count the U.S. among that list.

As we are all acutely aware, the COVID-19 pandemic further revealed existing deficiencies in our current systems and the need for more effective channels of monetary policy transmission. It has spurred some countries to accelerate the development of their digital cash projects by launching pilot programs to assess the feasibility of issuing a CBDC.

Many governments and consumers recognize the shifting technology landscape around digital currency and digital assets, but often with large education gaps and even some confusion.

An interesting example of the last time we encountered similar widespread, global interest in the technology behind our economic institutions—with varied levels of public understanding—takes us back to the 1990s and 2000s.

While recent nostalgia for the era has brought back many fashion and style trends I thought (and maybe even hoped) I’d never see again, Y2K represents a defining cultural moment that has new importance and relevance to me in my work with The Digital Dollar Project and exploration of CBDCs.

Y2K, while now a distant memory to many, was a pivotal culture-shaping phenomenon (not unlike the one we find ourselves in today) and was most likely the first time average people heard or thought about the technology behind the world’s systems, institutions, and economies.

Reactions varied, with some preparing for the end of the world and others using the event as a plot point for movies and television shows. Many felt an angst that came with the unknown, yet Y2K was a topic of great debate and discussion, especially in the media.

In the end, thanks to the hard work of hundreds of thousands of individuals, our economies, banks, and governments emerged with a few bruises but still standing, and having learned some valuable lessons.

I am a firm believer that the recent past informs the future and I bring up Y2K because I see opportunities to apply these hard-learned lessons to CBDCs, especially in this nascent period. ...

Read more in the CBPN Members' Library with your annual subscription.

No part of Central Bank Payments News may be reproduced, copied, republished, or distributed in any form or by any means, in whole or in part, without the express and prior written permission of the publisher, Currency Research Malta, Ltd.