BIG IDEA | ‘So why should America care about any of this?’
‘Because China’s digital yuan ambitions are not just a domestic project. China has been quietly planning to take the digital yuan global. That means that aside from making payments much more efficient domestically, the digital yuan could challenge the supremacy of the U.S. dollar.’
Here's an issue to have on your radar.
- And as usual for these sorts of issues, the U.S. is about to be caught asleep at the China switch again.
- In any case, the impact goes far beyond U.S.-China relations.
‘China is moving quickly to launch a digital yuan, potentially replacing cash domestically and challenging the U.S. dollar globally.’
- ‘Chinese banks have given away millions of dollars to incentivize users to make payments with the digital yuan through pilot programs across a number of major Chinese cities.’
‘China’s central bank digital currency, also known as CBDC, DCEP or eCNY, is essentially a digital form of cash that can be used for everyday purchases, like groceries.'
- ‘The digital yuan is often referred to as a kind of homegrown cryptocurrency.’
- ‘But make no mistake, it will be nothing like bitcoin, the world’s leading cryptocurrency.’
‘Bitcoin is not backed by any government or central bank, while the digital yuan is supported by the People’s Bank of China.’
- ‘Bitcoin is a relatively private form of payment in that it allows for pseudonymous transactions.’
- ‘By contrast, some fear that the digital yuan will make it that much easier for the government to monitor citizen transactions.’
- ‘Just last week, the People’s Bank of China admitted that a fully anonymous digital yuan is not “feasible.” ’
‘So why should America care about any of this?’
- ‘Because China’s digital yuan ambitions are not just a domestic project.'
- ‘China has been quietly planning to take the digital yuan global, as my colleague David Pan recently reported’’.'
- ‘That means that aside from making payments much more efficient domestically, the digital yuan could challenge the supremacy of the U.S. dollar.’
‘Is Washington even taking this seriously?’
- 'Despite a constant flurry of China headlines, top U.S. policy makers are largely silent on the digital yuan.’
- 'Biden has not mentioned it in any significant way.’
‘Last week, Fed Chair Jerome Powell made it clear that the U.S. is in no rush to issue a digital dollar, and would only do so with widespread political and public support.’
- ‘ “You can expect us to move with great care and transparency,” Powell said.'
- ‘In other words, don’t hold your breath.’
- ‘Interestingly, Powell also said that a U.S. digital dollar would need greater privacy protections than a digital yuan.’
‘We don’t know exactly when China will officially launch its digital yuan, but it could make an appearance at next year’s Beijing Olympics.’