How will China’s digital currency affect the Dollar?

Could the USA see the dollar threatened by China’s new digital currency? There is always a possibility of that. Since bitcoin was launched in 2008, becoming the first crypto asset with its own unit of account based on the blockchain, there are now more than 3000 crypto assets with a diverse range of features.

Yet we have seen my many different regulatory authorities around the world that they do not feel threatened by crypto-asset growth since there is such an extream volatility in the value.

If you recall Facebook’s announcement back in June about its planned global crypto-asset, Libra captured more attention than any other stable coin that has been released. Libra will be far more influential than any other, given that Facebook has 2.4 billion users. In addition to the anti-money laundering and data privacy issues, Libra is planning to bring it to the forefront.

Why do I mention this, well with the possible emergence of attractive private sector-issued stable coins like Libra, it seemed to have sparked anxiety amount emerging economies and have the Central banks try to develop there own digital currencies.

China has been considering CBDC issuance for many years. It recently launched a joint project with large commercial banks and tech firms to see how they can implement this on a two-tier system where the central bank will issue the digital currency directly through them. Given the fact that China’s economy accounts for 15 percent of global GDP and has a significant impact on any emerging initiative.

A dominant dollar has been the source of instability in emerging economies due to its extensive use as a trade invoice currency and an external debt currency. There is a chance that introducing hegemonic digital currency and have it issued by the central banks could reduce the dollar’s dominance and promote more diversification of internal currencies.

China wants the CBDC to go through them so they can have a significant impact globally to put more pressure on the dollar and trying to see if they can get power over the dollar. The US has had a long-standing of being the currency that everyone compares it too, and China wants to change that. With this digital currency, they think they might be able to make it happen.