Opinion: The Digital Yuan will not be able to compete with the Dollar?
Kataryna Habeliia November 4, 2020
Table of Contents
The Digital Yuan will not be able to compete with the Dollar
According to the President of Independent Strategy, David Roche, the Chinese digital currency (CBDC) is unlikely to be able to oust the US dollar from the world market.
If the digital yuan tries to outshine the dollar, it will have a very long way to go to achieve this goal. The dollar currently accounts for the largest share of transactions in the global market.
Even the euro is unable to compete with the dollar since the EU currency accounts for no more than 20% of world transactions.
David Roche emphasized:
To overthrow the dollar that the euro tried to do is very difficult to do. The yuan now accounts for only 2% of international settlements or even less.
The President of Independent Strategy also noted that despite the contraction of the US economy, the influence of the dollar in the world remains very large and this fact cannot be ignored.
Indian economist opinion
A leading Indian economist has a similar opinion. He believes that the upcoming introduction of the digital yuan in China will not pose a threat to the dominance of the US dollar. Although the Asian country has already overtaken other countries in building digital payments and innovation infrastructure.
In an article published by Project Syndicate, Indian economist Eswar Prasad, professor of trade policy at Cornell University and senior fellow at Brookings Institution, wrote that China’s central bank digital currency (CBDC) “is unlikely to affect the dollar’s status as the world’s dominant reserve currency.”
At the same time, Prasad acknowledged that the digital yuan could “enhance the role of the Chinese currency as an international payment currency.” Especially if Beijing is optimizing the token with its “cross-border payment system“ (mostly blockchain-based). Also, he noted that “the country’s government continues to reform financial markets and removes restrictions on capital flows.”
The People’s Bank of China periodically recalls that it has already achieved great results in the development of its token CBDC. The head of the Central Bank Yi Gang talked about the successful testing of the digital yuan this week. According to him, during the tests, the regulator processed more than 4 million transactions worth up to 2 billion yuan (about $ 300 million).
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