The international campaign to shift away from the US dollar is gaining momentum. Experts believe that cryptocurrencies have every chance of displacing the greenback. If global central banks step up their efforts to create their own virtual money, the dollar could face serious challenges.
The mainstream adoption of national digital currencies could erode the dollar’s dominance in cross-border payments. According to an IMF report, about 93% of monetary authorities around the world are currently exploring the possibility of issuing their own digital currencies. This in turn could "help de-dollarization," the bank assumes.
Central bank digital currencies are likely to boost payments in local currencies, thus encouraging further de-dollarization. It takes its origin from China, which has already introduced a digital yuan, and Russia, which plans to create a digital version of the ruble.
"In dollarized or euroized economies, the introduction of a CBDC could encourage a greater use of the local currency by making it a more attractive means of payment," the IMF wrote in the report. At the same time, the impact of CBDCs would depend directly on the extent to which they address the barriers to financial inclusion in a particular country.
Notably, a central bank digital currency (CBDC) is money that a country's central bank can issue. It is not physical money like banknotes and coins.
