Today, China introduced its Digital Currency Electronic Payment System, often known as the electronic yuan or electronic renminbi (abbreviated e-CNY or e-RMB). It will very certainly undermine Alipay and WeChat Pay’s supremacy in China’s financial technology business, while also allowing the government to monitor almost all financial transactions in real-time. Naturally, China’s status as the first country to develop a central bank-backed digital currency has worldwide ramifications.
Is It Conceivable For The Digital Yuan To Compete Globally With The Dollar
According to some analysts and the yuan pay group, China’s development of a digital currency based on blockchain technology is an attempt to wean the world’s financial system off the dollar. At the moment, the dollar accounts for 88% of global trade, followed by the euro and the Japanese yen. Another important currency is the British pound sterling. Other prominent currencies include the Canadian dollar, the Australian dollar, and the Swiss franc. According to the International Monetary Fund, just around 4% of world trade is presently conducted in Chinese currency. As a consequence, experts feel that the e-CNY cannot compete with the dollar since the rest of the world has abandoned the yuan. However, China’s readiness to continue in this manner has repercussions for the United States’ capacity to hold firms accountable:
In 1944, the dollar was designated as the world’s reserve currency for international commerce. It has maintained its prominence due to its relative stability and mobility. For example, the United States may now monitor financial transactions and sanction businesses that break global democratic principles, which is a significant advancement.
The Society for Worldwide Interbank Financial Telecommunications (SWIFT) in Belgium keeps track of these transactions for the United States. SWIFT is a communication system that permits the transmission of electronic payments between organizations located in different countries. Following the September 11th attacks, the United States placed penalties on people, corporations, and nations found to be sponsoring terrorism and breaching international human rights standards, among other things.
- The export of authoritarian “Controllable Anonymity” is now in progress.
While the United States, Japan, and a number of other nations are also experimenting with digital currencies, it seems that China is pursuing the benefits of possessing the world’s top currency. The Diplomat spoke with Emily Jin, an author, and research assistant, on the implications of China becoming the first country to embrace a central bank-backed digital currency.
The Digital Yuan As A Strategy For Internationalization To internationalize and compete with the dollar, Chinese authorities and the yuan pay group will need to break away from it not just to challenge its hegemony, but also from its payment rails. The most efficient approach to accomplish both goals at the same time would be to employ greenfield payment rails such as CBDC. China will need time to develop agreements and techniques for exchanging digital yuan with the rest of the globe before it can begin. Given the fact that CBDCs are a relatively new technology with no globally defined specifications or design, China may possibly become the industry standard-setter. According to the PBoC’s white paper, the central bank has been working on developing digital currency standards, which has included talks with regulators from other countries, international financial organizations, and universities. Furthermore, the bank has contributed to the development of a worldwide standard system for digital fiat currencies, which is now being developed by international organizations..