China’s planned digital yuan could pose a serious challenge to the U.S. dollar’s dominance, a fintech expert claims.
Richard Turrin, author of Cashless: China’s Digital Currency Revolution, was speaking on CNBC’s Squawk Box Asia.
“Remember, China is the largest trading country and you’re going to see digital yuan slowly supplant the dollar when buying things from China,” he said. “If we go about five to 10 years out, yes, the digital yuan can play a significant role in reducing the dollar’s usage in international trade.”
He claims some countries want to reduce their dependence on the U.S. dollar when trading, hastening the adoption of the digital yuan.
“What you’re going to see in the future is a rollback, a risk management exercise that seeks to slowly and maybe just slightly reduce the dependence on the dollar, from 100% down to 80%, 85%,” he said.
China’s central bank has been working on a CBDC for several years
The People’s Bank of China has been working on the rollout of its central bank digital currency (CBDC) since 2014 and is believed to be ahead of other counties.
Last Nov, China proposed establishing a Beijing-based exchange for trading digital assets as part of the State Council’s plan to support financial services in the capital. The exchange would also serve to promote the use of the digital yuan.
China’s Ministry of Industry and Information Technology and the Office of the Central Cyberspace Affairs Commission also want faster CBDC trials and have directed institutional banks to create the necessary infrastructure with firms.
The country sees itself becoming the global leader in blockchain power over the next five years by nationalizing the industry and banning private cryptocurrencies.
During this year’s Winter Olympics, China set up at least 261 million digital wallets, equivalent to a fifth of its total population, for its central bank digital currency (CBDC), the digital renminbi (RMB).
The report said transaction volume reached 87.5 billion, following several successful pilots in key cities.
However, Turrin dismissed speculations China would use the CBDC to help Russia circumvent the wide-ranging economic sanctions imposed by the West for invading Ukraine.
“The digital yuan is a baby in the sense that it is in trial but has not yet launched domestically, nor has it had any testing on an international basis,” he said.