State-led digitalization of currencies and payments as a vector for global and domestic de-dollarization?

The International Monetary and Financial System (IMFS) is currently facing two important movements. On one hand, the digitalization of currencies; on the other hand, an increasing effort of many countries in the world to reduce the dependency on the US dollar. This article aims therefore to investigate if these two movements may be interconnected. In particular, it aims to analyze if state-led digitalization of currencies and payments may be a vector for de-dollarization in two dimensions: i) the global economy; ii) the national economies in (partially or totally) dollarized countries. In a moment in which the US pushes for the digitalization of currencies through private assets, this article aims to provide a theoretical contribution on the role of public digital money and public digital payment systems to both curb the potential dissemination of USD-backed stablecoins, but also to reduce the dependency on the US-dollar. The research methodology combines theoretical discussions on dollarization and de-dollarization with an analysis of four concrete cases of state-led central bank digital currency (CBDC) and/or digital payment systems initiatives in economies experiencing varying levels of dollarization: Ecuador (Dinero Electrónico), Nigeria (e-Naira) and Cambodia (Bakong digital payment system) and China (e-CNY and Project mBridge). The aim is to assess the effectiveness of these top-down initiatives, driven by the states and central banks, in reducing dollarization both domestically and internationally. The main argument of the paper is that state-led digitalization (of currencies and payments) may be understood as a potential vector to foster the use of national currencies (both domestically and regionally), but it is far from enough to promote de-dollarization.