This report describes the potential role of central bank digital currencies (CBDCs) in strategic competition, focusing on whether and how the more advanced stage of China's CBDC project might advantage China, how decisions regarding the international governance of CBDCs might affect U.S. national power, and how the design choices of a U.S. CBDC might affect its capabilities as an instrument of national power.

Central Bank Digital Currencies and U.S. Strategic Competition with China

Daniel Egel, Jim Mignano, Sale Lilly, James V. Marrone, Max Rangeley, Charles P. Ries, Jessie Wang, Dulani Woods

ResearchPublished Jan 18, 2024

This report describes the potential role of central bank digital currencies (CBDCs) in strategic competition. Understanding the national security implications of both international CBDC developments and a potential U.S. CBDC is a central component of President Biden's March 2022 Executive Order 14067 on "Ensuring Responsible Development of Digital Assets." This executive order mandated an assessment of foreign CBDCs and their potential effect on U.S. finance, as well as effects on national security and financial crime — concerns that are overshadowed by the relatively advanced stage of China's CBDC. This report contributes to the discourse that has emerged from that executive order by describing whether and how the more advanced stage of China's CBDC project might advantage China, how decisions regarding the international governance of CBDCs might affect U.S. national power, and how the design choices of a U.S. CBDC might affect its capabilities as an instrument of national power.

Key Findings

  • China's CBDC does not pose an urgent threat to U.S. national security.
  • Emerging international CBDC governance is likely to reinforce the existing international financial system rather than undermine it.
  • CBDC collaborations among G20 members that are not part of the G7 could undermine the strength of the U.S. dollar abroad and open workarounds to financial channels that the United States currently relies on to exert leverage.
  • A U.S. CBDC might not be necessary to combat security threats posed by other CBDCs, but it might enable novel national security capabilities, such as new ways to freeze assets and track foreign investments in the United States.

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Egel, Daniel, Jim Mignano, Sale Lilly, James V. Marrone, Max Rangeley, Charles P. Ries, Jessie Wang, and Dulani Woods, Central Bank Digital Currencies and U.S. Strategic Competition with China, RAND Corporation, RR-A2911-1, 2024. As of September 11, 2024: https://www.rand.org/pubs/research_reports/RRA2911-1.html
Chicago Manual of Style
Egel, Daniel, Jim Mignano, Sale Lilly, James V. Marrone, Max Rangeley, Charles P. Ries, Jessie Wang, and Dulani Woods, Central Bank Digital Currencies and U.S. Strategic Competition with China. Santa Monica, CA: RAND Corporation, 2024. https://www.rand.org/pubs/research_reports/RRA2911-1.html.
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