China has been doing so much when it comes to blockchain adoption and the issuance of its digital Yuan takes precedence among them. As the country looks to strengthen global financial inclusion, a lot of analysts have argued the likelihood of China’s digital Yuan displacing the U.S dollar as the world’s reserve currency.
Source: Finance Magnate
According to a CNBC report on Nov. 2, David Roche, president and global strategist at Independent Strategy stated that China’s central bank digital currency or CBDC which has already passed pilot tests could potentially knock off the U.S dollar as a reserve currency, however it would take a “very, very long time.”
“Dethroning the dollar — which the euro tried to do, and settled at a miserable 18–20% of all the international things that go on — is very, very difficult. […] There is a certain amount of illusion at the moment that the yuan — which accounts for 2% of international trade settlements and even less if you come to financial investment flows — that this can take over.”
Worries Amid The Sinking U.S Economy
Image source: Coingeek
Amidst the rising debt structure and sinking U.S economy, Rochie has emphasized that despite the slow or negative growth experienced in the past 20 years, the dollar has maintained an “increasing proportion of the settlement of international trade and an even bigger proportion of financial reserves”
Rochie’s comment on the state of a U.S issued CDBC has been centered on the comment previously made by Jerome Powell — the U.S. Federal Reserve’s chairman who declared in October that the U.S government was less concerned about China’s first-mover advantage in the issuance of CBDC. Powell further reiterated that the U.S is more concerned about getting it right rather than being the first.
Industry Experts Echo Sentiments on Digital Yuan
The U.S dollar as a reserve currency of the world has always been a focal point when it comes to matters of international trade settlement and the basis of exchange, which makes it an object of concern with every policy coming out of the States.
In October 2019, former chair of the Commodity Futures Trading Commission, Christopher Giancarlo made an argument of the likelihood of the U.S dollar losing its dominance if its digital version does not launch soon. Other countries are already experimenting with their CBDC and this could pose a threat to the U.S dominance, Giancarlo stated.
Anthony Pompliano, a co-founder of major cryptocurrency firm Morgan Creek Digital, aligned his view in the same light, reiterating that the U.S. is going to fall “really far behind China” if the country keeps delaying its digital dollar initiative. The aspect to look out for is how these will compete with the more established cryptocurrencies in the short term.