Digital Dollar Could Overwhelm Local Currencies: Rajan

The video discusses the potential of digital currencies like the digital dollar and yuan to open up banking systems globally, especially in low-income countries. However, it also highlights the risks of dollarization, where countries might abandon their local currency for a more stable foreign digital currency, leading to a loss of monetary sovereignty and fewer economic tools. While digital currencies offer immediate benefits, they may not be in the best long-term interest of countries unless there is total mismanagement of the local currency.

What are the potential benefits of a digital dollar for low and middle-income countries?

What concerns arise from the accessibility of digital currencies like the digital dollar or digital yuan in poorer countries?

How does dollarization affect a country's monetary sovereignty?

What are the implications for a country that abandons its currency in favor of a foreign digital currency?

In what scenarios might it be in the best interest of a country to abandon its currency?