The Atlantic Council warns that the US is falling behind competitors in the CBDC arena

The Atlantic Council, a well-known think tank, recently commented on the United States’ position in the central bank digital currency (CBDC) arena. The think tank warned that the US is significantly falling behind other major competitors, specifically China, India, and the EU.

The Atlantic Council seemingly views CBDCs as the future of money, which is why the US’ slow progress on developing a functional CBDC, even if it is not yet ready to use it, is viewed as concerning.

The US is lagging behind

China was the nation that started the CBDC race years ago, and last year, in 2023, it ramped up its work on the so-called digital yuan. Meanwhile, the ECB claims to be in the preparation phase regarding its digital euro. At the same time, India reports millions of daily digital rupee transactions processed by commercial banks in the country.

The US, however, is seeing little to no progress, as the Federal Reserve still calls for caution regarding pushing ahead with any pilots. Multiple state governors have also expressed skepticism regarding the need for a CBDC. In other words, the situation in the US is similar to what was seen in the most advanced nations back in 2018 and 2019, with concerns and questions regarding the necessity of CBDC still dominating the discussions.

Presidential candidate and former US president Donald Trump even vowed to prevent the creation of a digital dollar if he wins the elections. He called the CBDCs “a dangerous threat to freedom.”

Meanwhile, the Atlantic Council’s GeoEconomics Centre warns that the US is lagging behind its peers and competitors when it comes to technological payments innovation. The Centre’s Josh Lipsky and Ananya Kumar said that the People’s Bank of China (PBoC) has dedicated over 300 people to working on CBDCs. Meanwhile, the Fed’s team consists of fewer than 20 individuals.

The council further added that the Fed should react in a way that will allow it to take the lead on the matter and set standards that would influence the developments of future CBDCs, as well as the payments sector, in general.

The risk of failing to act in time

The think tank members argue that central banks worldwide are asking for the Fed’s assistance in tackling the same issue, and the Fed cannot offer it since it has not yet gone through the process.

Lipsky and Kumar warned that this comes with a certain dose of risk, as the absence of more US technological models and standards would lead to the creation of a fractured system constructed using a variety of designs, cybersecurity standards, and varied messaging systems.

It would not reach its full potential and become a fast, cheap, and safe system but rather one that would make money less secure. In other words, they argue that the CBDC is coming, whether the US Fed, the governors, or former president Trump liked it or not, and the lack of action will do more harm than good in the long run.

But, the authors have noted that American tardiness goes beyond the CBDCs. There has been a massive lack of progress regarding the improvement of international payments, and the US was also criticized for being too slow to take up its FedNow system.

“Between now and next January, Fed officials should do more to accelerate exploration efforts on all of their payment projects, including faster cross-border transfers and CBDCs. If they don’t, the future of money may quickly pass them by.”