NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

By Kenneth Rogoff

As the COVID-19 crisis accelerates the long-term shift away from cash (at least in tax-compliant, legal transactions), official discussions about digital currencies are heating up. Between the impending launch of Facebook’s Libra and China’s proposed central-bank digital currency, events today could reshape global finance for a generation. A recent report from the G30 argues that if central banks want to shape the outcome, they need to start moving fast.

Much is at stake, including global financial stability and control of information. Financial innovation, if not carefully managed, is often at the root of a crisis, and the dollar gives the United States significant monitoring and sanctions capabilities. Dollar dominance is not just about what currency is used, but also about the systems that clear transactions, and, from China to Europe, there is a growing desire to challenge this. This is where a lot of the innovation is taking place.

Photo courtesy of Xresch.