China may slash yuan/greenback usage gap with digital currency technology

Source:Global Times Published: 2019/12/5 0:23:39

A worker checks on Bitcoin mining equipment at a facility in the Garze Tibetan Autonomous Prefecture, Southwest China's Sichuan Province. File photo: VCG

China will be able to reduce the gap in terms of use between the yuan and the US dollar with its superiority in digital currency technologies, even if it can't entirely replace the latter's dominance in global payments, market watchers said on Wednesday. 

Their comments came at a time when many countries are jumping into the worldwide race of blockchain, a key digital currency technology that might reshape the world's monetary system. 

"A war of crypto tokens will break out next year, and 'soldiers' will not only include central banks and governments but also multinationals like Facebook and large cross-border financial institutions. Competition will be beyond imagination," Cao Yin, a Shanghai-based blockchain veteran, told the Global Times on Wednesday. 

Many have also become aware that China might stand out in the digital currency contest. 

"China now definitely comes out at the head of the list when it comes to digital currency technology," Yang Wang, a senior research fellow with the Fintech Institute of Renmin University of China, told the Global Times. 

According to Yang, the digital currency being developed by China's central bank, called DC/EP, has a peak transaction per second (TPS) speed of about 220,000, compared with about 40,000 for Paypal and 1,000 by Libra, the crypto token currency rolled out by Facebook. 

"In terms of technology, China's digital currency excels, whether in its security level or speed, which means it will surpass competitors in user experience," Yang said. 

China will thus be able to popularize its digital currency at a fast speed, presumably faster than the push for a globalized yuan, Yang said, adding that China can draw about 2 billion international users of its crypto token in the first phase. Apart from domestic users, people in countries in Southeast Asia or those along the Belt and Road Initiative routes are likely to jump in at first. 

China will also be able to reduce the usage gap with the US dollar, with many countries already considering shaking off dependence on the greenback as reserve currency. Bank of England Governor Mark Carney, for example, has recently argued that the dollar's position as the world's reserve currency could be replaced by a global digital alternative, according to a Guardian report in August. 

By September, the yuan had a share of 1.95 percent in global currency payments, while the US dollar took a share of 40.51 percent, according to data released by the Society for Worldwide Interbank Financial Telecommunications -- not a narrow gap in any sense. 

"It's too early to say that digital currencies or other fintech can help China displace the US dollar's dominant role, not to mention that popularization of China's digital currencies is very likely to face blocks from the US government or some of its allies," Yang said. 


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