China CBDC to Challenge US Dollar Dominance, Says Author

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China’s planned dig­i­tal yuan could pose a seri­ous chal­lenge to the U.S. dollar’s dom­i­nance, a fin­tech expert claims.

 Richard Tur­rin, author of Cash­less: China’s Dig­i­tal Cur­ren­cy Rev­o­lu­tion, was speak­ing on CNBC’s Squawk Box Asia.

“Remem­ber, Chi­na is the largest trad­ing coun­try and you’re going to see dig­i­tal yuan slow­ly sup­plant the dol­lar when buy­ing things from Chi­na,” he said. “If we go about five to 10 years out, yes, the dig­i­tal yuan can play a sig­nif­i­cant role in reduc­ing the dollar’s usage in inter­na­tion­al trade.” 

He claims some coun­tries want to reduce their depen­dence on the U.S. dol­lar when trad­ing, has­ten­ing the adop­tion of the dig­i­tal yuan.

“What you’re going to see in the future is a roll­back, a risk man­age­ment exer­cise that seeks to slow­ly and maybe just slight­ly reduce the depen­dence on the dol­lar, from 100% down to 80%, 85%,” he said.

China’s central bank has been working on a CBDC for several years

The People’s Bank of Chi­na has been work­ing on the roll­out of its cen­tral bank dig­i­tal cur­ren­cy (CBDC) since 2014 and is believed to be ahead of oth­er counties.

Last Nov, Chi­na pro­posed estab­lish­ing a Bei­jing-based exchange for trad­ing dig­i­tal assets as part of the State Council’s plan to sup­port finan­cial ser­vices in the cap­i­tal. The exchange would also serve to pro­mote the use of the dig­i­tal yuan.

China’s Min­istry of Indus­try and Infor­ma­tion Tech­nol­o­gy and the Office of the Cen­tral Cyber­space Affairs Com­mis­sion also want faster CBDC tri­als and have direct­ed insti­tu­tion­al banks to cre­ate the nec­es­sary infra­struc­ture with firms. 

The coun­try sees itself becom­ing the glob­al leader in blockchain pow­er over the next five years by nation­al­iz­ing the indus­try and ban­ning pri­vate cryptocurrencies. 

Dur­ing this year’s Win­ter Olympics, Chi­na set up at least 261 mil­lion dig­i­tal wal­lets, equiv­a­lent to a fifth of its total pop­u­la­tion, for its cen­tral bank dig­i­tal cur­ren­cy (CBDC), the dig­i­tal ren­min­bi (RMB). 

The report said trans­ac­tion vol­ume reached 87.5 bil­lion, fol­low­ing sev­er­al suc­cess­ful pilots in key cities. 

How­ev­er, Tur­rin dis­missed spec­u­la­tions Chi­na would use the CBDC to help Rus­sia cir­cum­vent the wide-rang­ing eco­nom­ic sanc­tions imposed by the West for invad­ing Ukraine.

“The dig­i­tal yuan is a baby in the sense that it is in tri­al but has not yet launched domes­ti­cal­ly, nor has it had any test­ing on an inter­na­tion­al basis,” he said.

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