It is a critical first step that the financial policymakers of the United States have acknowledged the need for a CBDC, but that realization is not enough. 

Because the Libra now seems viable, the question becomes whether there is a need to integrate a digital currency into the global economy.

It is already evident that coronavirus (COVID-19) has triggered a deeper recession than that of the 2008-2009 Global Financial Crisis. Much like the latter, monetary authorities at the US Federal Reserve have undertaken unprecedented actions to support liquidity in global markets. These steps have included support for domestic debt markets, including a recent expansion in the corporate bond market, as well as swap lines targeting the global dollar shortage. Beyond these moves, the broader policy response during and after the COVID-19 outbreak may drive longer-term changes in the global trading system.  

While New York, London, and Hong Kong will continue to play outsized roles in international business, their current privileged status may be more precarious than it seems.

If left unchecked, Beijing’s aggressive use of its “rules” threatens to turn Western firms into the Communist Party’s enforcers.

If a symbolic denouncement is indeed the goal, Magnitsky sanctions are likely the right tool, as they would send a powerful message of solidarity with protesters to both the Hong Kong and mainland authorities. 

America’s sanctions strategy is increasingly burdened by the involvement of systemically important financial institutions and sovereign investors in global financial statecraft. In the post-9/11 world, Washington’s strategy was highly effective in pursuing non-state actors like al-Qaeda or ISIS, as well as small, rogue nations like Iran. Yet in addressing larger sovereigns like the Kremlin, US strategy has struggled to maintain the same effectiveness given the cross-border financial connections linking these entities to Western markets. As an era of great power competition among Washington, Moscow, and Beijing sets in, these foes will crowd out smaller, non-state actors, thus demanding an adequate response from the Treasury.