Digital Assets May Shift Global Trade Currency

  • Lois Tullo, Executive in Residence, Global Risk Institute
Computer generated futuristic image of a globe surrounded by symbols of different currencies.

Executive Summary

The race to develop and adopt global stablecoins (GSC)/central bank digital currencies (CBDC) has the potential to put the stewardship of the global financial system up for grabs.

Greater than 80% of global trade and 61% of the World Reserves are denominated in US dollars (USD), while 2% of World Reserves are denominated in renminbi (RMB). China has made agreements with Australia, Japan, Thailand, Russia, and Vietnam to allow for direct currency trade, instead of converting to the US Dollar. China is perceived to be in the lead in piloting their CBDC. The ease of exchange that is facilitated by CBDC and GSC could influence the future form and currency of existing trade. The speed of adoption of digital money in all forms is accelerating at warp speed (see Figure 1 (in downloadable PDF) for an illustration of the actual and projected growth). Over the last two months, nations have woken up to the importance of this development and are accelerating the race to introduce CBDC and GSC through changes in regulatory acceptance of cryptocurrency, piloting of CBDC, and approving financial service organizations to operate in this space. This acceleration is taking place both in regulated and unregulated forums. A complete or significant switch to digital money that is unregulated could cause a seismic shift in the existing monetary framework. To that end, governments, central banks, regulators, and market participants need to be at the forefront of this cyber transformation being led by the introduction of GSC/CBDC.