The introduction of a digital U.S. dollar could help democratize banking in poorer countries, but it also poses a risk to local currencies if it were readily accessible, according to former Indian central bank Governor Raghuram Rajan.
An easy-to-use electronic version of the greenback could spur people in lower-income nations to use the dollar for day-to-day transactions, something that’s difficult today thanks to the need for physical bills. That could effectively crowd out the local currency in countries where there’s low levels of confidence in macroeconomic policy, according to Rajan’s argument.
