Michael R347 Lee#2

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What role do central bank digital currencies (CBDCs) play in forex?

CBDCs are state-issued digital versions of fiat, designed for secure and efficient transactions. For forex, CBDCs could revolutionize settlement speed, reduce costs, and enhance transparency in cross-border payments. Example: China’s digital yuan trials highlight how CBDCs may internationalize currencies. Benefits: improved efficiency, reduced counterparty risk. Risks: surveillance concerns, interoperability issues, and geopolitical tensions. Institutions monitor CBDC development closely, anticipating shifts in global capital flows. Retail traders may eventually trade CBDC pairs directly. CBDCs represent a major evolution in money itself—reshaping how forex markets clear and settle in the digital age.