People tend to view CBDCs through a retail lens, seeing them as new digital payment units that citizens would use in daily purchases. That somewhat overhyped idea has fueled concerns about state surveillance of people’s spending – to such an extent that opposition to CBDCs
By cryptographically locking an exchange rate forward-contracts into a decentralized, blockchain-based escrow structure could protect an exporter and an importer from currency volatility over the timeframe of their trade deal without either party having to trust the other, or anyone else, to hold the funds. Voilà, no need for the dollar to sit in the middle.
As such, they could eschew the grossly inefficient current system in which a U.S.-regulated correspondent bank typically acts as the trusted third party in the deal, first exchanging the importer’s renminbi into dollars and then converting them into reals for the Brazilian exporter. If such arrangements proliferated, I have argued, it would reduce global trade-related demand for dollars and, by extension, diminish investment in dollar reserve assets such as U.S. government bonds.