China’s announcement of the Digital Yuan has reportedly raised some eyebrows in the White House, with some voicing their concerns on how the digital asset can affect the U.S. dollar’s standing as the world’s top reserve currency.
According to a recent article by Bloomberg’s Mohsin, various officials of the Biden Administration, including the State Department, Treasury, Pentagon, and National Security Council, are planning to boost their efforts in understanding the possible implications of China’s digital currency.
According to Mohsin’s sources, who are referred to in the article as “the people” per their anonymity agreement, the aforementioned government offices are more concerned about how China’s digital currency will be circulated and if it can be used to circumvent existing U.S. sanctions over its immediate impact.
Digital yuan rollout
The Chinese development of its Digital Currency/Electronic Payment (DC/EP) system was made public in 2019. The development involved the country’s biggest state-owned banks and payment titans such as Ant Financial and Tencent.
The Chinese government, via the People’s Bank of China, has started a trial issuance of the digital currency in a number of cities across its sovereignty; marking the first time a major central bank has issued a virtual currency. A much larger rollout is in the pipeline by February 2022 during the Beijing Winter Olympics.
A lot of details regarding the Digital Yuan are still veiled; it’s still not clear how it will be distributed. Albeit, China’s recent dealings with global financial network provider SWIFT (Society for Worldwide Interbank Financial Telecommunication) suggest that it could be integrated into the existing financial infrastructures.
Chinese officials have gone on record to state that the main intentions of the digital Yuan are to phase out coins and banknotes, as well as dissuade the use of cryptocurrencies.
Where Uncle Sam stands
Given these developments on China’s cooperation with SWIFT, U.S. officials are somewhat reassured, according to Mohsin’s sources, that the Digital Yuan is not intended as a workaround for U.S. sanctions.
Note that the greenback’s status as the world’s reserve currency gives the United States the ability to isolate business and even sovereignties from the global financial network.
While the Biden administration does not plan to take action, the initial issuance of the Digital Yuan once again sparked talks regarding the Digital Dollar, according to the report. The U.S. Congress has also voiced its interest in the development of the country’s own digital currency.
Jerome Powell, Federal Reserve Chairman, in February, said, “we don’t need to be the first. We need to get it right,” in reference to the idea of the Digital Dollar.
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