The IMF’s “Central Bank Digital Currency Virtual Handbook” published last week pointed out that the increased use of CBDCs can “reduce dollarization” of the global economy.
- “De-dollarization” is a situation where countries move away from relying on the U.S. dollar as a reserve currency.
- De-dollarization would push up borrowing costs in the United States, making loans expensive for businesses and individuals, thus affecting economic growth.
- In addition to de-dollarization, a CBDC “could increase risks of flight to safety from retail bank deposits in periods of market stress.”