CBDC Wars: Why The U.S. Must Create Its Own Stablecoin To Compete With China

The United States is embarking on a campaign toward the introduction of a CBDC, or central bank digital currency. As part of the White House’s first-ever comprehensive framework, the Treasury Department is now suggesting the creation of a national stablecoin or CBDC.

To counter China’s advancements on the CBDC, five panelists at a hearing for the U.S. House Committee on Financial Services on Tuesday voted in favor of the U.S. adopting some form of national digital currency.

A CBDC is typically defined as a central bank’s digital liability that is readily accessible to the public. Today, Federal Reserve notes are the only kind of central bank currency available to the general public in the United States.

CBDCs, which typically operate on blockchain networks but are centralized and regulated by the issuing country, would enable the general public to make digital payments, similar to existing forms of real cash.

Tuesday’s hearing, titled “Under the Radar: Alternative Payment Systems and the National Security Impacts of Their Growth,” was hosted by the U.S. House Subcommittee on National Security, International Development, and Monetary Policy.

China is moving ahead with the development of its digital yuan. Image: FDI China

CBDC – A ‘Unanimous Need’

Michael San Nicolas, a representative from Guam, requested an “on-the-record” vote among the panel of witnesses to determine the degree to which the U.S. government needs to develop a digital currency.

All five speakers agreed that a “unanimous need” existed.

The panel’s unanimous vote does not ensure the development of a CBDC in the United States. While the decision was just to clarify the panel’s position, the hearing and its primary findings suggest that a CBDC is likely in the near future.

The hearing follows Biden’s March executive order, in which he not only described the government’s strategy to digital assets but also requested policy proposals for the approach from numerous government agencies.

CBDC Wars: Is China Winning Against The U.S.?

During Tuesday’s hearing, panelists expressed worry on the threat posed by China’s rising financial presence as a competitor to the U.S. economy. Atlantic Counsel Nonresident Senior Fellow Dr. Carla Norrlof explained that China is building its own central bank digital currency to compete with the U.S. dollar.

Scott Dueweke, a fellow at the Wilson Center, noted that China’s CBDC is part of the nation’s efforts to “gather information on people.”

While the U.S. discusses the prospects of forming its own stablecoin, China has been making headways in its CBDC experiments.

The People’s Bank of China will begin testing its new digital version of the Chinese Yuan in four additional Chinese regions, according to the South China Morning Post.

Meanwhile, President Biden frequently defines his vision for the United States in a single word: opportunities. A “digital dollar” may appear implausible, yet the U.S. has the wherewithal to turn things around in its favor given its edge in terms of technology.