The US Digital Currency: Understanding CBDCs and Their Global Implications

What is CBDC? Definition and Context

CBDC (Central Bank Digital Currencies), or state digital currencies, represent a major evolution of the modern financial system. But what exactly is CBDC? It is a digitized version of the national currency, issued and directly controlled by a country’s central bank — in this case, the Federal Reserve for the digital dollar.

Unlike decentralized cryptocurrencies like Bitcoin and Ethereum, what is CBDC at its core? It is a centralized financial instrument, fundamentally different from the operation of public blockchains. While Bitcoin relies on distributed consensus and transparency of the decentralized ledger, a CBDC would be managed by a central authority, ensuring the government’s full control over the money supply.

Interest in this concept exploded in the late 2010s, especially after the emergence of national digital currencies in other parts of the world. China with its digital yuan and the European Union with its work on the digital euro have pushed the United States to accelerate their thinking on a potential digitization of the dollar.

The Current State: Where Are We in 2025?

To date, despite years of discussions and pilot projects, the digital dollar has not been officially launched. The Digital Dollar Program project did lead to feasibility tests between 2021 and 2023, but concrete implementation remains stalled.

The political situation clarified in January 2025 when President Donald Trump signed a federal decree explicitly prohibiting government agencies from developing or promoting CBDCs. This position was reinforced by Jerome Powell, Chair of the Federal Reserve, who stated that as long as he holds his position, no concrete work would be undertaken on this technology.

Obstacles remain significant:

• Political resistance: A large part of Congress and the administration oppose the creation of a government digital currency
• Technological barriers: Building an infrastructure capable of handling transactions for 330 million citizens is a colossal challenge
• Social issues: About 45 million Americans lack access to a smartphone, creating financial inclusion problems

Economic Impact and Implications for the Financial System

If the digital dollar were to come into existence, its repercussions on the global economy would be profound. The US dollar remains the dominant international reserve currency, used in over 60% of cross-border trade transactions.

A digital currency could reinforce this dominance by simplifying international payments and reducing dependence on traditional banking intermediaries. However, it would carry significant systemic risks. Economists point to the danger of a “bank run”: if citizens could hold their savings directly in digital wallets managed by the Fed, rather than in commercial bank accounts, this could significantly weaken the traditional banking system by reducing deposits available for credit.

This dynamic also explains why American banks strongly oppose this project. Their political influence with Congress helps maintain the status quo.

International Context: Other Countries Are Moving Forward

While the US debates, other powers are not wasting time. China has already deployed its digital yuan in real transactions since 2021, using it for retail payments and B2B transfers. In the Bahamas, the “Sand Dollar” has been operational since 2020 — the first CBDC in the world to be fully functional.

The European Central Bank is accelerating its work on the digital euro, viewing this initiative as a strategic response to American technological dominance. This global race for CBDCs creates indirect pressure on Washington, even if the current administration resists.

Technical Architecture: How Would the System Work?

If implemented, the digital dollar would have a radically different architecture from decentralized cryptocurrencies. Probable features include:

Centralized infrastructure: Unlike Bitcoin, which operates on a blockchain with distributed nodes, the digital dollar would use a centralized platform controlled by the Federal Reserve. Some experts suggest using elements of (Distributed Ledger Technology) to improve auditability and transparency, but without relinquishing central control.

Digital wallets: Citizens would access their funds via secure mobile applications or banking interfaces. Multi-factor authentication and digital signatures would protect transactions against fraud.

Immutable record: All transactions would be archived on the federal platform, creating a complete and traceable history of each financial operation.

Fixed exchange rate: The value would remain pegged 1:1 to physical dollars, eliminating the volatility characteristic of cryptocurrencies.

Fundamental Differences with Cryptocurrencies

The digital dollar and Bitcoin/Ethereum have major structural differences:

Implications for Stablecoins

The emergence of a government-backed digital dollar would pose an existential question for stablecoins like USDT and USDC. These thrived precisely because there was no official, stable alternative. With a true digital dollar backed by the Fed, why use a decentralized intermediary?

However, stablecoins would retain advantages: faster transactions, absence of centralized control, and accessibility without a bank account. A coexistence rather than a complete substitution is therefore likely.

Privacy and Financial Freedom Concerns

American opposition to the digital dollar largely stems from concerns about surveillance. Critics highlight that:

• A CBDC would give the government full visibility into each citizen’s financial flows
• The government could theoretically freeze accounts or block transactions deemed politically unacceptable
• Civil liberties could be compromised by total traceability

These fears explain bipartisan support for the current ban. Even among progressives and conservatives, mistrust of financial surveillance transcends traditional political divides.

Global Perspective and Impact on Financial Flows

The absence of a US digital dollar could paradoxically weaken America’s hegemonic position in the long term. As the digital euro and digital yuan develop, some emerging markets might shift toward these alternatives, gradually fragmenting the international financial system currently centered on the dollar.

This could promote the adoption of regional and decentralized digital currencies, contrary to initial authorities’ intentions.

What About Market Actors?

For investors and traders, the current scenario is clear: the digital dollar is not an imminent threat. Stablecoins will likely continue to play a central role in the crypto-financial ecosystem for the foreseeable future.

However, international developments should be monitored. Widespread adoption of the digital yuan in Asian trade zones or acceleration of the digital euro could trigger ripple effects in crypto commodity markets.

Projects involving tokens linked to CBDC infrastructure (consensus, security, interoperability) could emerge as promising investments in the coming years.

Conclusion

The digital dollar remains an unfinished idea, blocked by political, social, and technological obstacles. Although it represents a logical evolution of the monetary system in the digital age, its realization depends on major political changes that the United States does not seem ready to accept in the short term.

For the cryptocurrency and decentralized financial instruments ecosystem, this status quo is actually an advantage: the absence of direct government competition preserves space for innovation and growth in digital alternatives. The market will likely continue to evolve according to its own logic, while CBDCs will gradually deploy in other regions of the world.