What prevents the emergence of the digital dollar?

A Golden Age for Leading Cryptocurrencies

Blockchain is the future of fintech

The dollar remains the main reserve currency of the world

Progress in the work on the creation of a digital dollar

Who did not have time, he was late

In 2021, China conducted beta testing of the digital yuan. Although the official launch of the currency has not yet taken place, the Chinese online retailer JD.com (NASDAQ:JD) announced in November that it would be hosting e-CNY on its platform during the Chinese “Bachelor’s Day” holiday. According to available data, as of November 11, more than 100 thousand consumers had already used the digital yuan.

Many countries have announced the need to take a step towards fintech and create a digital currency. The US Federal Reserve and the Treasury Department have been considering what work they need to do to digitalize the dollar. Fed Chairman Jerome Powell at one of the press conferences after the FOMC meetings stated that the most important thing about the digital dollar is “to do everything right.”

However, government departments are working at a snail’s pace

America is already in many ways a digital economy: credit and debit cards have long replaced paper money. Mobile payments have also become widespread. Fewer and fewer people use paper bills, not to mention coins.

Meanwhile, against the background of rising prices due to inflationary pressure, it is now even hard to believe that the largest bill in the United States has a face value of $ 100. The emergence of the digital dollar in the United States is only a matter of time. And yet, the world’s largest economy lags behind other countries in the introduction of fintech technologies.

A Golden Age for Leading Cryptocurrencies

Although bitcoin and ether, the two leading cryptocurrencies, fell in value after the formation of “bearish” reversal patterns on their charts on November 10, they still show an impressive increase for 2021, if we focus on the levels of December 19.

BTC/USD – monthly timeframe BTC/USD – monthly timeframe

The chart above shows that bitcoin ended 2020 at $28,986.74. If we proceed from the level of $46,632.96 as of December 19, the price of bitcoin for 2021 increased by 60.9%.

ETH/USD – monthly timeframe/USD – monthly timeframe

Ether had an even more successful year, rising from $738,912 at the close on December 31, 2020 to $3,905,221 as of December 19, 2021. Thus, this year the ether has grown by 5.28 times.

Meanwhile, the total market capitalization of all cryptocurrencies was $767,482 at the end of last year. By December 19 of this year, it reached $2,203 trillion, an increase of 2.87 times, which is better than bitcoin, but worse than ether.

To summarize, this asset class has increased its critical mass. This growth not only reflects increased confidence in the prospects of various cryptocurrencies — it should also be considered a manifestation of the development of the global fintech industry, which is changing the financial status quo.

And although cryptocurrencies are becoming more and more supporters, there are also plenty of opponents. When it comes to this growing asset class, emotions are running high. These global currencies, whose price is determined solely by purchases and sales on the crypto market, take away power from governments and central banks, which can increase or decrease the money supply to stimulate or curb economic growth.

The crypto revolution has created an ideological confrontation between libertarianism and the status quo supporting governments and traditional banking control over national and international financial arenas.

Blockchain is the future of fintech

While cryptocurrencies cause polar reactions, there is a broad consensus about blockchain. Blockchain is a system of recording information, the mechanisms of which make the task of changing data, hacking or fraud in the network extremely difficult or even impossible. Each block in the chain contains a certain number of transactions, and when processing each new transaction, an entry about it is added to the registry of each of the nodes.

Blockchain technology was first described in 1991 by Stuart Haber and Scott Stornetta, who tried to develop a method to prevent manipulation of timestamps of documents. Blockchain and cryptocurrencies are inextricably linked, since the first such database was described in the seminal work on bitcoin, the so-called “white paper” by the mysterious Satoshi Nakamoto.

Since the first mention of blockchain technology appeared in the literature back in 1991, it precedes cryptocurrencies. On the other hand, digital tokens have made it the basis of the financial system: blockchains provide an increase in the speed of transaction processing and the efficiency of keeping records of them. Over the past few years, companies and governments have invested huge amounts of money in the development of fintech and blockchain technology.

The dollar remains the main reserve currency of the world

The US dollar is the world’s reserve currency, which means that central banks, governments and monetary authorities around the world keep dollars in their reserves. Reserve currencies are freely convertible, stable currencies that reflect the economic situation in the issuing country.

Like all other national currencies circulating today, the dollar is a fiat currency. This means that its value depends entirely on faith and trust in the United States of America. The government can increase or decrease the money supply to solve economic problems. The authorities of different countries usually cooperate in the foreign exchange markets in the interests of stability. They often intervene by buying or selling dollars, euros, yuan, pounds and other currencies in order to prevent excessive volatility, since the global payment system depends on the stability of exchange rates.

Over the past decades, technology has changed most aspects of our lives. We are less likely to have cash with us and pay for goods and services using credit and debit cards. In addition, online purchases cannot be paid with bills and coins.

Progress in the work on the creation of a digital dollar

The Fed has been studying the issue of creating a digital dollar for some time. The newly appointed deputy chairman of the Fed, Lael Brainard, called on the central bank to develop a digital currency as a matter of urgency. In July, she said that she “cannot understand why the United States is not actively working on the creation of an official digital currency, unlike China and other countries.”

However, Treasury Secretary Janet Yellen remains undecided. She recently stated,

“In my opinion, there are both pros and cons. And I can’t make a decision yet.”

Although the Fed is considering the possibility of creating a digital dollar, the US has not yet made real progress when it comes to using the fruits of fintech and the technological financial revolution. America is indeed the richest country with the most influential fiat currency, but the lack of progress and consensus on this issue is of concern given that other countries are about to launch their own digital currencies.

Who did not have time, he was late

The Chinese economy has reached such a size that it now challenges the leadership of the United States. China has already started the second phase of cross-border testing of the digital yuan. Testing is carried out in China and Hong Kong.

While China and other countries are actively implementing blockchain technology and creating digital versions of their currencies, the US risks being left far behind. Chinese officials are calling for the use of the digital yuan as a regional currency throughout Southeast Asia, which would threaten the dollar’s status as the world’s reserve currency.


The US needs to act without delay, not just quickly. If the central bank, the Ministry of Finance and the country’s leaders continue to delay, the impact of the US currency may decrease. Who did not have time, he was late.

The success of cryptocurrencies is a trend that warns of a decline in confidence in fiat currencies. At the same time, it also indicates that fintech is the next stage in the evolution of the financial sector. The US needs to get to work quickly. Otherwise, the dollar will lose its status as the world’s reserve currency.