Biden Administration is Wary of the Role of the Digital Yuan

The speed of China’s advancement in digital currency has left much of the rest of the world playing catch-up. While the US is concerned about the geopolitical consequences of China’s digital yuan, a number of other players have also entered the race.

By
Robert D. Knight
on
April 14, 2021
Category:
Blockchain News

US Worries Regarding the Digital Yuan

The Biden administration is increasingly concerned about the digital yuan and its potential to undermine US political interests, according to an anonymous source cited in Bloomberg. According to the insider in the US camp, a number of officials are wary that the launch of China’s Central Bank Digital Currency (CBDC) could pose a long-term threat to the stability of the US, and the role of the US dollar as the world’s reserve currency.

This has galvanized the Treasury, State Department, Pentagon, and National Security Council to conduct roundtable talks, to better understand what security implications the digital yuan may hold. These entities are begging to prepare their monetary defenses before the ground erodes beneath their feet. The source says the digital yuan is not perceived to be an immediate threat to the entire global financial system, but it could be leveraged to breakthrough trade sanctions imposed by the US in 2020.

The Currency Arms Race

The speed of China’s advancement in digital currency has left much of the rest of the world playing catch up. In an interview on CBS’s ‘60 minutes’ on Sunday evening, Federal Reserve Chairman Jerome Powell confirmed that the US central bank is researching a digital currency of its own. He predicted that the road ahead may not be easy, but indicated that the Fed is making progress. 

Powell told the network, "There are many subtle and difficult policy choices and design choices that you have to make," but added, “we're doing all that work.”

Highlighting the importance of the US dollar’s reserve status to the country he went on to say: "We are the world's reserve currency, meaning that people use dollars even if they have no connection to the United States. They use dollars to pay for things all over the world."

It is unclear when any digital dollar might materialize, but China’s central bank already enjoys a five-year head start on the US. The exact timeline for the launch of China’s CBDC is not yet known, the Beijing Olympic games are believed to be the CCP’s preferred deadline for a full rollout. 

Several tests and trial runs have already been conducted, including in Shenzhen, the boomtown which sits on the mainland side of the Hong Kong border. Since late 2020, the CCP has been distributing digital yuan in the city through a series of lotteries, with winners receiving “red envelopes” of around $30-50. Some 50 million yuan ($7.6M) has now been distributed, with winners able to spend the digital currency in over 3,000 designated businesses.


New Money, New Rules

While the US is concerned about the geopolitical consequences of China’s digital yuan, a number of other players have also entered the race. Among the chasing pack of nations is Sweden, who have been testing their own e-krona since 2017. In 2019 the Bahamas announced its plans to release the ‘digital sand dollar’, while the Marshall islands are working on a CBDC to be built on the Algorand blockchain. 

The pursuit of centralized digital currencies is also occurring in the European Union as the continent grows concerned not only of China’s CBDC but cryptocurrencies such as BTC, ETH and the high flying BNB. The European Central Bank (ECB) is now considering its own CBDC as a response to the proliferation of both centralized and decentralized currencies around the world. The ECB will make a definitive ruling on the matter at some point later this year, but with the financial landscape evolving, and the rules of money changing, it would seem likely that Europe may also soon enter the centralized currency race - giving the Biden administration even more to think upon.

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Robert D. Knight

Robert D. Knight is an experienced journalist and copywriter who has been working in crypto for 4+ years. His bags are heavy and he also hodls some cryptocurrency.