JP Morgan: CBDC Threatens Hegemony of US Dollar

Saturday 23 May 2020, 6:59 AM AEST - 3 months ago

JPMorgan believes the central bank digital currencies, or CBDC, could pose a threat to the global hegemony of the US dollar.

According to a report covered by Bloomberg, the banks chief U.S. economist asserted that [t]here is no country with more to lose from the disruptive potential of digital currency than the United States.

This revolves primarily around U.S. dollar hegemony. Issuing the global reserve currency and the medium of exchange for international trade in commodities, goods, and services conveys immense advantages, the report added.

Blockchain undermines US dominance over trade finance

While JPMorgan doubts the dollar will be displaced as the global reserve currency soon, the report warns that fragile peripheral aspects of the currencys dominance may be eroded, including trade finance and the SWIFT messaging system.

During March, eight major banks including HSBC and Citi announced that a collaboratively developed blockchain trade finance will see a commercial launch in Singapore during the second half of 2020.

Blockchain-based trade finance initiatives have also been launched in China, Oman, and Europe.

Digitizing the dollars dominance

The report advocates that the U.S. launch a digital dollar project in order to migrate its monetary dominance into the rapidly growing digital sphere.

JPMorgan warns that other countries could use digital currencies to circumvent the SWIFT system and the reach of economic sanctions, undermining the ability for the United States to exercise power on a global stage through control over the global reserve currency.

Offering a cross-border payments solution built on top of a digital dollar would, particularly if designed to be minimally disruptive t ...

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