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“If everything goes well, China may have a bigger area to extend the digital yuan, much more than before,” Caudevilla said. The Regional Comprehensive Economic Partnership trade agreement, signed at end of last year by 15 Asia-Pacific countries including China, and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership trade bloc, which China says it wants to join, could redirect foreign direct investment flows and provide opportunities for using the digital yuan, he added.
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But it’s taking the US too long to make this decision if it wants to beat other countries.” What is China’s sovereign digital currency?Ĭaudevilla said it was possible that the digital yuan – officially known as the Digital Currency Electronic Payment – could have important international implications in shaping the future monetary system, even if the new currency does not become widely adopted for everyday purchases in the US and other Western countries. “Creating a digital dollar would be a defensive move against the digital yuan. “The advances of the digital yuan have pretty much caught everyone off guard in the West,” said Oriol Caudevilla, chief strategy officer at cryptocurrency banking service provider ScallopX. In contrast, China’s willingness to develop a digital yuan could enhance the efficiency of yuan-denominated cross-border payments and create new avenues for China to bypass the global US dollar monetary system. However, the US dollar’s global dominance may also be one of the main reasons the US is reluctant to move to a new form of central bank money, analysts said.
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The US dollar’s share as a global payments currency also stood at 38 per cent in January, compared to the yuan’s 2 per cent, SWIFT data showed. The US dollar currently accounts for 60 per cent of global foreign exchange reserves, well above the yuan’s 4 per cent, according to the International Monetary Fund. But it’s taking the US too long to make this decision if it wants to beat other countries even now the and Treasury are getting worried about the Chinese creating a digital currency and having it replace the US dollar as a global reserve currency,” said Nouriel Roubini, professor of economics at New York University’s Stern School of Business.Ĭreating a digital dollar would be a defensive move against the digital yuan. Get the latest insights and analysis from our Global Impact newsletter on the big stories originating in China.