Central Bank Digital Currency (CBDC) Projects Struggling in Five-Eye Nations
Canada and Australia have put their plans for retail Central Bank Digital Currencies (CBDCs) on hold, while the United States could soon become the first country to explicitly prohibit the central bank from issuing a CBDC. This comes as a financial revolution is quietly sweeping the globe, potentially redefining the nature of money, making it programmable, highly surveillable, and centrally controlled.
Global CBDC Exploration
At the time of writing, around 90 countries and currency unions were exploring a CBDC. Today, that number has increased to 134, representing 98% of global GDP. Around 66 of those countries are in the advanced stage of exploration—development, pilot, or launch. However, the United States is not included in this list. In fact, the US could soon become the first country to explicitly ban the central bank from issuing a CBDC, much to the dismay of certain think tanks.
CBDC Anti-Surveillance State Act
In May, the US House of Representatives passed HR 5403, also known as the "CBDC Anti-Surveillance State Act." This bill, sponsored by US Senator Ted Cruz, proposes amendments to the Federal Reserve Act to prohibit the US Federal Reserve from issuing CBDCs. It also seeks to protect the right to financial privacy and prevent the U.S. government from using their financial system against their own citizens.
Global Reaction to CBDCs
The prospect of the US, the current holder of the world's reserve currency, permanently withdrawing from the global race to develop a CBDC is causing concern in think tank circles. The Brookings Institute warned that unless US policymakers adapt to an increasingly digital financial system, the United States risks losing the economic and geopolitical advantages afforded to it by the dollar's dominance of the global financial system.
Canada and Australia's Stance on CBDCs
Among the countries that have decided, or claim to have decided, not to issue a "retail" CBDC are two fellow five-eye nations: Canada and Australia. The Bank of Canada was one of the first Western countries to begin exploring the idea of issuing a CBDC, a whole seven years ago. Until recently, it seemed that the central bank was intent on launching a retail CBDC. However, just a month ago, it quietly reversed policy.
The Reserve Bank of Australia has also expressed doubts about developing a retail CBDC, turning its attention instead to a wholesale CBDC.
Wholesale CBDCs on the Rise
This near-simultaneous shift by Canada and Australia appears to be part of a broader global trend away from retail CBDCs. In recent months, central banks in Switzerland and Taiwan have both expanded wholesale CBDC projects at the expense of retail alternatives. A report by the Bank for International Settlements (BIS) has also confirmed this shift, revealing a sharp rise in wholesale CBDC projects, particularly in advanced economies.
US Stablecoins
Dollar-backed stable coins are being touted as a means of entrenching US financial supremacy in global finance. However, the fast-growing stablecoins being issued by the likes of Tether, Circle, Stripe, and Paypal will be just as programmable and surveillable as CBDCs.
Conclusion
While recent statements from Trump and other Republican politicians may offer a sliver of hope that the US will somehow resist the global march toward CBDCs, they should also be taken with a generous dose of caution. While bread-and-butter CBDCs have finally begun receiving the public attention they deserve due to their terrifying surveillance and seizure potential, few realize a privately issued synthetic CBDC could do much the same –– and perhaps even more.
Bottom Line
The global shift towards digital currencies is undeniable, but the form they will take and the implications they will have on privacy and financial control are still up for debate. What are your thoughts on this issue? Do you think the benefits of CBDCs outweigh the potential risks? Share this article with your friends and join the conversation. Don't forget to sign up for the Daily Briefing, which is delivered every day at 6pm.
