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Circle CEO warns of active and accelerating de-dollarization

April 27, 2023 Coin Telegraph

Banking Crisis

The United States must capitalize on the “high demand” for digitally native U.S. dollars, particularly from those in emerging economies with weak local banking systems, the Circle CEO says.

The United States must implement stablecoin legislation and digitize the U.S. dollar to mitigate the “very active de-dollarization taking place” around the world right now, says Jeremy Allaire, the CE of stablecoin issuer Circle.

Allaire’s comments at the Consensus 2023 conference on April 26 were made in light of the recent U.S. banking crisis.

The CEO of Circle — the stablecoin issuer behind USD Coin (USDC) — called on Congress and the Federal Reserve to take action, saying that otherwise, alternative currencies and payment systems would continue to eat into the dollar’s dominance:

“We have a very active de-dollarization taking place. You’re having very significant reactions to the U.S. risks in the U.S. banking system, risks with the U.S. government itself, a geopolitical imposition on many parts of the world [and] the desire for alternative payment systems all around the world."

“This is happening and it's accelerating,” he added.

For the USD to remain “competitive” and “safe” in the internet era, Allaire said the U.S. needs to lay out stablecoin legislation imminently, and the Federal Reserve needs to implement the digital dollar into its “core systems” to capitalize on the high demand around the world:

“The demand for digital dollars like USDC is highly global. We see that demand all around the world — we see it in emerging markets, we see it in markets where people want to hold a digital dollar versus their local banking system [...] as an efficient medium of exchange for various types of international transactions.”

If we want to make the dollar safer and more competitive, we need to do two things:
- unleash it's power as a native data type on the internet, that can be openly used and integrated
- remove the underlying bank lending IOU risk on electronic money, and separate payment tokens… https://t.co/DThvu8Dt25
— Jeremy Allaire (@jerallaire) April 26, 2023

If the U.S. government doesn’t get its act together, this will be a “giant missed opportunity” for the country, Allaire stressed.

The call for action comes as the Chinese yuan overtook the dollar for cross-border transactions in China for the first time in March, according to Reuters.

Chinese Yuan overtakes US dollar as most-used currency in China's cross-border transactions for the first time in history.

Yuan-share rose to a record high of 48%, UP from nearly zero in 2010.

U.S-share declined to 47%, DOWN from 83% over the same period.

Wow. pic.twitter.com/Lm3Rygpm45
— Genevieve Roch-Decter, CFA (@GRDecter) April 26, 2023

Circle has taken some responsibility into its own hands of late, having launched USDC on Cross-Chain Transfer Protocol.

Allaire said the new solution is the “most important new piece of blockchain infrastructure” since the firm began minting and issuing USDC in 2017.

Magazine: Unstablecoins: Depegging, bank runs and other risks loom

US lagging on CBDCs could spell ‘trouble’ — Crypto Council policy head

March 1, 2023 Coin Telegraph

Anti-Surveillance

Fanusie doesn’t believe the Chinese-led CBDC movement on the global stage will replace the U.S. dollar, but it may cause a series of geopolitical headaches.

A cryptocurrency researcher and former CIA analyst believes the United States government’s relatively slow start on Central Bank Digital Currency (CBDC) development may result in it losing grip on controlling the global financial system.

Yaya Fanusie, the policy head at the crypto advocacy group the Crypto Council for Innovation explained in a Feb. 28 Bloomberg interview that sanctioned states are looking to transact on financial infrastructure that isn’t controlled or heavily influenced by the U.S. in order to move funds more freely cross-borders.

If the U.S. continues to sit on the “sidelines” and lag behind on CBDC adoption, Fanusie believes this may spell “trouble” and cause unforeseen “geopolitical implications” over time:

Fanusie explained that state-issued CBDCs could be a part of this financial infrastructure that becomes globally adopted, and that if the U.S. has little influence over these new standards, then this “impacts U.S state economic statecraft.”

“The potency of our sanctions power comes from the centrality of the U.S. to the financial global infrastructure. So if that shifts a little bit, it doesn't mean that China is going to take over or that the yuan is going to displace the dollar but if there's a viable new rail where sanctioned actors can now transact, that’s trouble.”

The U.S. Federal Reserve has however recently made progress on its CBDC — the Digital Dollar Project — having released the latest version of its whitepaper on Jan. 18:

Today we are proud to release DDP's 2023 white paper update where we revisit our "champion model" proposed in 2020, provide recommendations to the US government and private sector and look ahead to the next stage in #CBDC developments @giancarloMKTS https://t.co/bX5u4zfqMc pic.twitter.com/si2joxbkq9
— The Digital Dollar Project (@Digital_Dollar_) January 18, 2023

However, the Federal Reserve has not received approval from the U.S. government to proceed with the CBDC project.

Fanusie highlighted that China has benefited from a near-first mover advantage, having explored CBDCs since 2014 and launching the pilot version of its digital yuan (e-CNY) on Jan. 4, 2022, which Fanusie says has processed “millions of transactions” across “millions of wallets” so far.

Fanusie added that there is an “array of pilots” testing out smart contracts to add programmability into the CBDC and that China helping other countries adopt similar standards.

He added there is possibly an unspoken “race” going on in the CBDC frontier as nations look to gain a geopolitical edge.

“That's happening whether we want to like it or not.”

However previous commentators on the CBDC race between China and the U.S. have said that China’s CBDC ambition is purely about domestic dominance rather than trying to beat the U.S. dollar.

CBDCs run on state-controlled ledgers, which are reported to be more efficient and easier to use in some cases than decentralized public networks, such as Bitcoin and Ethereum.

However, some opponents of CBDCs believe states are adopting blockchain-powered CBDCs to maintain a degree of financial control over their citizens.

Part of the pushback in the U.S. recently came from pro-crypto U.S. Congressman Tom Emmer, who recently introduced the CBDC Anti-Surveillance State Act in an effort to protect the financial privacy of U.S. citizens from actions by the Federal Reserve:

Today, I introduced the CBDC Anti-Surveillance State Act to halt efforts of unelected bureaucrats in Washington, DC from stripping Americans of their right to financial privacy. pic.twitter.com/lONbHFZMk7
— Tom Emmer (@GOPMajorityWhip) February 22, 2023

Geopolitics