The US is falling behind other countries on progress to develop a central bank digital currency (CBDC), American think tank Atlantic Council has warned.

The organisation says that technological payments innovation at the US Federal Reserve (the Fed) is “lagging behind its peers and competitors”, with less than 20 people working on digital currency research and development at the central bank.

In comparison, The People’s Bank of China currently has more than 300 people working on developing a CBDC, while the Bank of England has a joint task force between the Treasury and Parliament.

According to the think tank, the "innovation gap" is not just linked to CBDCs, with the bank's long-awaited interbank settlement system having taken years longer than comparable systems in Europe.

The organisation says that Fed officials often have ready answers for why innovations are slow going, typically suggesting that the bank does not see a strong use case at present and that it is wary about unknown consequences of changing the existing system.

"It makes sense to not want to disrupt the currency that underpins the global economy," it said. "But the apparent belief of some inside the Fed and on Capitol Hill is that the dollar does not need to innovate. That is a miscalculation."

The think tank calls on the US government to drive payment innovation from a "position of strength", rather than from a defensive standpoint. It says that as the issuer of the world's reserve currency, it has a "unique opportunity" to set standards for the future of payments.

But, it warned that this is only possible if the US brings technological solutions to the table to influence the trajectory and that without its leadership "others will fill the vacuum".

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