Although Bitcoin and other cryptocurrencies have deeply captivated financial markets, another perhaps more critical trend is unfolding behind the headlines: China’s digital currency strategy.
Chinese digital currency push is driven two key motives. To track financial transactions and manage them more closely, and to weaken the domination of the US dollar in the global financial system, the National Bank of Canada reports.
The Chinese hopes to help transform the yuan into a widespread foreign currency by building a digital currency” they already great supervising forces will be strengthened by a digital currency. For example, it will allow the government to monitor financial transactions in real time and potentially block them. Digital currency also enables more adapted economic policies to be implemented.
Finally, they will allow Ant Group and Tencent to limit the dominance of a combined 94% on China’s online payment market. The digital currency in China might thus shift from A to B without online intermediaries, for example.
“China hopes on the international front to develop a payment mechanism that will not impede US financial sanctions and increase the world digital yuan. However, in order to enhance global use of their currency, digital or otherwise, China has big challenges. The most important of them is their management of resources, which keeps outflows under control. There are also concerns about the sufficient protection of properties under Chinese law. Some countries also fear Chinese influence on their economies only increased when it changed from the dollar to the yuan.
China would probably try to solve those obstacles by providing better access to the market and loans in exchange for digital yuan instead of dollars. As economic relations with China increase, countries are under increased pressure to move currencies.”
