The Real Use Case for CBDCs: Dethroning the Dollar

It’s all part of Pozsar’s “Bretton Woods III” vision, where the dollar ultimately loses its hegemonic status over the next decade. Importantly, he sees a different outcome from that of the British pound’s loss of reserve status in the early 20th century, when the U.S. dollar simply supplanted it. Instead, he predicts a multi-currency world where no one currency is dominant, a result made possible because of CBDC clearing mechanisms, which negate the need for reserve currency intermediation. Negotiating counterparts will need to agree on which of their two currencies to denominate their trade deal in, but they won’t have to default to the dollar, or some other universal standard, for actual settlement.