The U.S. dollar’s place as the world’s dominant reserve currency, while not in immediate danger, could eventually change as countries continue to explore central bank digital currencies (CBDC), according to one financial institution expert.
“While the dollar is not in any risk at the moment, over a long time period, three [to] five [to] seven years, there could be a fracturing of the international financial system,” Josh Lipsky, senior director of the Atlantic Council GeoEconomics Center, said during an appearance on CoinDesk TV’s “First Mover.”
Lipsky added that doesn’t necessarily mean another currency will replace the greenback, but it does suggest that a “real splintering of different means of transactions, not just dollar-based,” could follow.
Read more: Landmark International CBDC Test Deemed Success, BIS Says
According to the think tank, 105 countries representing over 95% of global GDP are exploring creating CBDCs. As the name suggests, CBDCs are digitally native, central bank-issued currencies that operate primarily via the use of blockchain technology.
Last week, a research project comprising an estimated 20 Asian-based commercial banks across four countries, successfully settled upwards of $22 million in foreign-exchange transactions, according to the Bank for International Settlements (IBS).
“We haven’t seen that before,” Lipsky said. “We’ve seen the technology tested. We’ve seen the hypothetical settlement, but we haven’t seen actual money in a serious amount flowing between countries.”
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