The administration of Vice President Joe Biden is reportedly concerned about the long-term impact of a digital yuan on the dollar’s role as the world’s reserve currency.
Bloomberg reported Sunday, citing unidentified sources, that officials at various government agencies are stepping up attempts to better consider the potential dangers faced by China’s initiative.
US Treasury, State Department, Pentagon, and National Security Council officials are apparently unconcerned about the short-term effect on the dollar of a digital yuan or China’s digital currency electronic payment (DCEP) scheme.
“U.S officials are less concerned about the international monetary/banking challenges, but they are keen to learn about the digital Yuan and whether it might be circulated to circumvent U.S sanctions,” one of the corresponding people said on the condition of anonymity.
A spokesman for the Treasury refused to speak on this issue. A spokesperson for the National Security Council did not immediately respond to a request for clarification.
However, long-term threats to the US dollar’s position as the world’s reserve currency remain a significant source of concern. According to the paper, officials have increased their efforts to learn how the digital yuan can be circulated and if it will fit beyond trade sanctions.
China started developing its DCEP program in 2019, as reported at that time, with the participation of the nation’s top government banks, as well as payments giants Tencent and Ant Financial.
The government is yet to outline several main aspects of the automated yuan, such as how it will be divided and who will receive it. We recently learned that China has formed a joint venture with SWIFT, the worldwide platform on which most cross-border payments are currently made, suggesting that it could be feasible for the country to introduce a digital yuan in the future.
The venture has since conducted many test runs, including gifting people with digital red packets of money through a draw, which they then spent at participating shops in select cities across China.
“To provide a backup or redundancy for the retail payment system, the central bank has to step up and provide digital-currency services”
Mu Changchun, Director of the PBOC’s digital-currency research institute
As a result of these measures, China’s central bank is expected to be the first global central bank to launch a digital currency, providing a strong foothold to the DCEP, a benefit that US officials are beginning to think about as well, the paper said.
