China looks to take its digital currency global

Date:

Ok China appears to have taken another major step in its quest to move the world away from the dollar and position itself as a major power in the world’s financial markets.

Thank you for reading this post, don't forget to subscribe!

What happened: China’s central bank has set up a partnership with SWIFT, the global system for cross-border payments, through its digital currency research institute and clearing center.

Why it matters: The move has sparked “speculation over the central bank’s pursuit of promoting the global use of its digital currency,” China’s state-operated Global Times wrote on Thursday.

The big picture: China is far ahead of the U.S. in the development of a central bank-backed digital currency and as such could be far ahead in the future of global payments and financial settlement.

  • If China can cement the yuan as the world’s favored digital currency, it could displace the dollar and provide China with the immense global privileges that have been enjoyed by the U.S. since the end of World War II.

Be smart: The lack of financial transactions in and broad use of its currency is the greatest detriment to China amassing global power.

  • The country has been opening up its financial markets and now has mainland stocks listed on top international exchanges like MSCI and its government bonds have been added to the global benchmark Bloomberg and JPMorgan bond indexes.
  • In 2020, China drew double the amount of foreign capital to its yuan-denominated government bonds as the year before.

On the other side: The ability of the U.S. to borrow money at will in international debt markets and to impose sanctions on countries it sees as hostile are both largely dependent on the dollar’s status as the world’s funding currency.

  • The use of the SWIFT system is a major conduit to imposing sanctions.

Where it stands: Federal Reserve governor Lael Brainard said in a speechin August that the Fed was working to build and test a “hypothetical” central bank digital currency, noting that CBDCs “present opportunities but also risks associated with privacy, illicit activity, and financial stability.”

  • European Central Bank president Christine Lagarde was similarly ambivalent about the development of a CBDC in January, saying it was “going to take a good chunk of time to make sure it’s safe,” adding, “I would hope that it’s no more than five (years).”
  • China has already rolled out tests of its digital yuan in several Chinese cities, testing payments with real customers in real stores.

Yes, but: Axios China author Bethany Allen-Ebrahimian points out that having the first-mover advantage isn’t necessarily an advantage in implementing digital currencies because technologies are changing so rapidly.

Share post:

Subscribe

Popular

More like this
Related

Access Holdings to pay N1.80 as final dividend to shareholder

March 28, 2024. Azonuchechi Chukwu. Access Holdings has revealed plans to...

Police gun down two notorious bandits in Benue

March 28, 2024. Azonuchechi Chukwu. Men of Operation Zenda, a Joint...

Army declares eight wanted in connection with the k!lling of its officers in Okuama

March 28, 2024. Azonuchechi Chukwu. The Nigerian Army has declared eight...

Naira Appreciates Against Dollar at the NAFEM Window

March 28, 2024. Azonuchechi Chukwu. The Naira’s euphoric appreciation against the...
Social Media Auto Publish Powered By : XYZScripts.com

Discover more from Naija247news

Subscribe now to keep reading and get access to the full archive.

Continue reading