Two main reasons behind China’s push for a digital currency – NBF
|While financial markets have become increasingly captivated by Bitcoin and other cryptocurrencies, behind the headlines another perhaps even more important development is emerging: China’s plan to create a digital currency. There are two main reasons for China’s digital currency push: To monitor and control financial transactions more closely and to weaken the US dollar’s dominance of the global financial system, as reported by the National Bank of Canada.
China is hoping that the creation of a digital currency will help address to transform the yuan into a widely used international currency
“For starters, a digital currency would strengthen China’s already formidable surveillance powers. For example, it would permit the government to track and potentially block financial transactions in real-time. Digital currency makes it possible also to implement more tailored economic measures. Finally, it will permit China to curtail the influence of Ant Group and Tencent, which control a combined 94% of China’s online payment market. China’s digital currency could therefore be designed to move from A to B without intermediaries such as online payment systems.”
“On the international front, China hopes to create a payment system that cannot be disrupted by US financial sanctions and that elevates the digital yuan on the world stage. However, China faces major challenges in trying to increase the global use of its currency, digital or otherwise. The most significant being its capital controls, which keep a lid on outflows. There are also doubts whether assets would be adequately protected under China’s legal system. Some countries also fear that switching from the dollar to the yuan would only increase China’s influence over their economies. China will likely attempt to overcome these challenges by offering greater market access and loans to countries in exchange for trade being settled in digital yuans instead of dollars. The greater the economic ties with China, the more intense the pressure that countries will face to switch currencies.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.