Race for the Future of Money: Fragmentation, Competition, and National Security in the World of Distributed Ledger Technology

July 2022 No Comments

Speaker(s): Kumar, A. (Assistant Director for Digital Currency, GeoEconomics Center, Atlantic Council)

Date: 20 July 2022

Speaker Session Summary

SMA hosted a speaker session with Ms. Ananya Kumar (Assistant Director for Digital Currency, GeoEconomics Center, Atlantic Council) as part of its SMA “Anticipating the Future Operational Environment” (AFOE) Speaker Series.

Since Satoshi Nakamoto’s 2009 white paper on blockchain technology—which laid the groundwork for Bitcoin’s creation—105 countries have at least investigated starting their own central bank digital currencies (CBDCs). Of these 105 countries, only 10 have fully launched a digital currency. These CBDCs can give countries several advantages, including faster, safer, and cheaper payments, as well as targeted credits to vendors or civilians. Countries’ increasing digitalization will continue to expand advantages relating to CBCDs, including transitioning a greater portion of their populations to the sovereign monetary system, Ms. Kumar added.

The young nature of crypto currencies and CBDCs does present novel security risks. While the implementation of CBDCs may aid some countries in facilitating their monetary duties, cryptocurrencies may also erode the US dollar’s value, threatening countries’ monetary sovereignty. Furthermore, crypto currencies are highly volatile, which is making countries reluctant to move away from safer and less volatile currencies, such as the US dollar and gold. The implementation of CBDCs will also likely encourage competition as countries seek to limit their citizens’ access to other states’ CBDCs to increase the value of their own.

Ms. Kumar concluded by discussing the current and future state of CBDCs. Of the four largest CBDCs in development, the US’s is the smallest and furthest behind in development. It is also likely that the creation of international standards will need to be formed in the near term. Future research on CBDCs will also need to be conducted, namely on regulatory hurdles, partisanship, the creation of standards without a standard implementation model, and CBDCs’ implementation and use. 

Speaker Session Recording

Briefing Materials