The article discusses how central bank digital currencies (CBDCs) will revolutionize international trade and reduce the need for the US dollar in the global economy. Key points include:
1. CBDCs are digital fiat currencies that were spurred by the invention of Bitcoin. They are seen as tools for government manipulation by Bitcoin enthusiasts, but they will have a significant impact on cross-border trade.
2. Countries like Brazil, the United Arab Emirates, Russia, Singapore, and China are experimenting with CBDCs. These countries play important roles in global trade, and their adoption of CBDCs will contribute to de-dollarization.
3. Direct settlement arrangements using CBDCs between countries will reduce the need for the dollar as an intermediating currency in trade finance. This shift is already happening, with Singapore allowing direct payments in China’s e-CNY.
4. The focus should be on cross-border CBDCs, rather than their use in retail transactions. Protocol-based interoperability will allow countries to directly exchange digital fiat currencies, reducing currency volatility and the need for trust in trade deals.
5. Economist Zoltan Pozsar predicts that central banks will act as clearing agents for their country’s exporting and importing firms, settling directly with foreign counterparts using CBDCs. This will diminish the demand for dollars and lead to a multi-currency world.
In conclusion, the rise of CBDCs will significantly impact the international monetary system and decrease the dominance of the US dollar. The US should accept this reality and leverage the advantages it still has as the issuer of a globally desired currency.
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