Former CFTC Chair Giancarlo on Russian Sanctions, CBDCs and Dollar Hegemony

Former Commodity Futures Trading Commission (CFTC) Chairman J. Christopher Giancarlo, is worried central bank digital currencies (CBDC) in the hands of adversaries can bust U.S. sanctions. That’s why the U.S. should accelerate creating its own “digital dollar,” he said on CoinDesk TV’s “First Mover” program on Friday.

Giancarlo, a co-founder of the Digital Dollar Foundation and senior counsel at Willkie Farr & Gallagher’s Digital Works unit, advocates for a CBDC to further U.S. interests and hegemony.

“CBDCs are absolutely being seen as a form of statecraft by countries that have been subjected to Western sanctions in the past and wish to have a way to avoid that in the future,” he said.

His comments come amid a period of increasing geopolitical tension – including Russia’s invasion of Ukraine and the subsequent financial sanctions imposed on the country by the West – and the rise of apolitical financial networks.

Nascent tools such as CBDCs and cryptocurrencies can theoretically bypass the dollar-denominated global economy, thereby thwarting U.S. influence abroad. China is far along on a pilot for its digital yuan, while Russia’s central bank only recently announced it has begun studying a CBDC to create a digital ruble.

Read more: China's Supreme Court Rules Crypto Transactions Constitute 'Illegal Fundraising'

Both nations have severely clamped down on domestic crypto use.

Giancarlo, nicknamed “Crypto Dad” by many, began his CBDC advocacy in 2020 through the Digital Dollar Project, which launched a pilot program for the greenback last year. In a Wall Street Journal op-ed, he argued that if the U.S. could send a man to the moon, the country could send the dollar into cyberspace.

Developing a CBDC in the U.S., however, will likely take years. A long-awaited Federal Reserve white paper on the subject, published in January, was seen as a “first step” towards an official digital dollar, but did not commit to a timetable.

Although Giancarlo claims a U.S. CBDC would, as he previously wrote, “extend the central role of the U.S. dollar in global finance and allow it to compete confidently in the new digital era,” he is not “for or against” sanctioning Russia. “I'll leave the geopolitical response to the people that are in charge of it,” he said.

He is concerned, however, that the extensive use of sanctions could be “the last hoorah” for that political weapon, and drive foreign states and companies to circumvent U.S. law.

Read more: President Biden Announces Technology Export Controls, Bank Sanctions Against Russia

“I think [sanctions] could drive and accelerate work by China and Russia to develop CBDCs and move portions of the globe off the dollar based system that we have today,” he said.

That could be concerning, he said. If the U.S. fails to accelerate developing a CBDC, its rivals, particularly China, could end up dominating the underlying technology used by others.

“In the same way they've done with 5G technology, they can be a major exporter of CBDC infrastructure,” Giancarlo said. “It's going to be CBDC-in-a-box provided to you by the People's Bank of China.”