An American CBDC is not the way to fight China’s financial might

The writer is senior fellow at the Institute on Race, Power and Political Economy at The New School

Few things frighten US policymakers as much as losing to China in the race for global economic supremacy. Now this battle is being fought in the arena of currency: last year, the Chinese government launched a central bank digital currency, giving consumers the power to hold digital yuan backed directly by the People’s Bank of China.

On cue, American political leaders are wondering if the US should launch its own CBDC. President Joe Biden issued an executive order in March requiring federal agencies to study the idea, and the Federal Reserve issued its preliminary report on the feasibility of the concept in January.

But a CBDC that brings only upside with no costs is a pure fantasy. As documented in a report released this week by the Roosevelt Institute, there are better ways to counter the rising global financial power of China than to pursue a Fed-backed digital currency. In other words, if American policymakers want to limit Chinese financial might, issuing a US CBDC is not the way to do it.

There are many reasons for China to issue a CBDC, not least that the PBoC would be…


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