In the CBDC Race, It’s Better to Be Last

In the CBDC Race, It’s Better to Be Last

(Matt Lee/Unsplash)

Is America being left behind? China is on the verge of issuing a central bank digital currency (CBDC) while America twiddles its thumbs. 

America needn’t worry. While it may look like a slacker, its approach to digital currency is probably the right one.

That’s because there is no first-mover advantage to issuing a central bank digital currency. With many products, being the first out the door is important to achieving brand dominance. But central bank digital currency is characterized by last-mover advantage, not first-mover advantage. Best to sit back and learn from the less-patient central banks as they struggle with their new digital projects.  

Central banks currently offer digital payments, but only to banks and other financial institutions. Their interaction with the public has been limited to paper money. A central bank digital currency, or CBDC, would provide everyone with an opportunity to get access to a digital version of central bank money. You or I could hold digital Federal Reserve dollars or Bank of Japan yen in our digital wallets and use these balances to buy coffee.

For years, CBDC has remained a theoretical construct of white papers and central bank thought-pieces. But recently the People’s Bank of China a CBDC, Sweden on a proof of concept, and the Bahamas its “sand dollar” CBDC project.

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