China’s New Digital Yuan, controlled by its Central Bank, could pose a threat to the U.S. dollar, the standard for intentional trade and the world’s reserve currency.
The Biden Administration Position
The Biden administration is stepping up scrutiny of China’s plans for a digital yuan, with some officials concerned the move could kick off a long-term bid to topple the dollar as the world’s dominant reserve currency, according to people familiar with the matter.
The Digital Yuan’s Momentum
Now that China’s digital-currency efforts are gathering momentum, officials at the Treasury, State Department, Pentagon and National Security Council are bolstering their efforts to understand the potential implications, the people said.
American officials are less worried about an immediate challenge to the current structure of the global financial system, but are eager to understand how the digital yuan will be distributed, and whether it could also be used to work around U.S. sanctions, the people said on the condition of anonymity.
The People’s Bank of China has rolled out trial issuance of a digital yuan in cities across the country, putting it on track to be the first major Central Bank to issue a virtual currency. A broader roll-out is expected for the Winter Olympics in Beijing next February, giving the effort international exposure.
The U.S Federal Reserve’s Position
“We have an obligation to be on the cutting edge of understanding the technological challenges, as well as the potential costs and benefits, of issuing a (central bank digital currency),” Jerome Powell, chairman of the U.S. Federal Reserve, the nation’s central bank, said at a recent virtual meeting of the Bank for International Settlements.
But Powell said the U.S. is in no hurry to develop its own cryptocurrency.
