The introduction of a digital U.S. dollar could help democratize banking in poorer countries, but it would also pose 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.
"That means that that country no longer has monetary sovereignty," Rajan, who also previously served as the IMF's chief economist, said in a Bloomberg TV interview Wednesday with David Westin. "It has fewer tools to deal with economic growth."
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