Republican Senator Steve Daines said India is the "fastest-growing" FinTech market in the world and far ahead of the US in terms of financial innovation.

The senator from Montana said the US faces a challenge from China, which has launched a digital Yuan, which they hope will one day displace the dollar as the world's dominant reserve currency.

"Even beyond the digital Yuan, it's no secret that China and many other countries are well ahead of us with regard to financial innovation," he said during a Congressional hearing by the Senate Banking, Housing and Urban Affairs Subcommittee on Economic Policy on Central Bank Digital Currency.

"India is among the fastest-growing FinTech markets in the world. In fact, India processed nearly 10 billion more real-time payments than China in 2020, $25.5 billion, versus $15.7 billion for China," Daines said.

He said that compared to India and China, the United States processed just $1.2 billion of real-time payments.

Darrell Duffie, the Adams Distinguished Professor of Management and Professor of Finance at Stanford Graduate School of Business, agreed during the testimony. "At this stage, the United States has fallen behind even India and China with respect to digital currency technology. And the competition for commercial services internationally is very important," Duffie said.

“US needs to invest in technology”

"US banks have been ceding ground to Chinese banks internationally. If the United States wants to compete, it is going to have to invest in technology in this area, particularly with respect to the new uses of digital ledger technology," he added.

Christopher Giancarlo, the former Chairman of the US Commodity Futures Trading Commission said the use of distributed ledger technology with tokenised money may present a future very different from the one known today.

"Today, we think of a global network of banking institutions that have been very useful to the United States in sanctions, power and other areas but also to clean up money laundering and surveil that banking network. But in the future, we may see very different networks of digital currency. There may be a Yuan network. There may be a dollar-based network," he said.

How these networks interact with each other is going to be of critical importance and the work of China in looking at blockchain technology and helping to set the standards of interoperability between these networks is going to be of critical importance.

"Whether we eventually want a digital dollar or not is almost an issue of second-order magnitude. The first issue is that we lead in the technological development and in the standard setting," Giancarlo said.