The United States government is worried about whether China’s current plans for a digital yuan could affect the US dollar status as the world’s dominant reserve currency over the long term.
Biden’s team shows concern over digital Yuan
As the Chinese digital currency continues to gain more momentum in the pilot phase, several government officials at the Treasury, State Department, Pentagon, and National Security Council are trying to understand the possible threats the Chinese CBDC initiative could pose to the dollar.
These departments aren’t worried about the short-term effect of digital yuan. They are only eager to understand China’s plan on distributing the digital yuan to the masses and if there’s a possibility that it could be put to use in the U.S sanctions.
Due to China’s recent decision to establish a joint venture with SWIFT, a suggestion that the digital yuan could only be functional within the current financial architecture instead of outside it was made.
The U.S. can cut a business or country’s access to the global financial system because of the dollar’s present dominance in cross-border trades.
The Chinese digital yuan
The People’s Bank of China spearheads the digital currency initiative in China, making it one of the major central banks pushing for a digital currency. Many cities in China have introduced different mediums for the trial and distribution of the digital yuan.
China started developing its digital currency electronic payment (DCEP) system by involving China’s biggest state-owned banks and payment giants, Tencent and Ant Financial, in 2019. Since then, the project has been through different tests like gifting citizens digital red packets of money through a lottery they spent in selected cities across China and participating stores.