A former People’s Bank of China governor has said that the country has no intention to replace the US dollar with the digital Yuan it’s working on.
The former PBoC governor and current head of the Chinese Finance Association, said that the Digital Yuan was not intended to replace the dollar or other dominant world currencies like the Euro. He explained that the Yuan was being designed to foster and improve cross-border trade and investment. Zhou then made a point of contrasting the digital Yuan with the Facebook-backed cryptocurrency project formerly known as Libra:
“If you are willing to use it, the Yuan can be used for trade and investment. But we are not like Libra and we don’t have an ambition to replace existing currencies.”
The former PBoc explained that China had learnt its lessons from the global regulatory pushback that the Libra project had received; with regulators fearing it would disrupt financial systems and monetary sovereignty. He said that the lessons drawn from Libra’s woes made China take a more cautious approach.
“Some countries are worried about the internationalization of Yuan. We can’t push them on sensitive issues and we can’t impose our will. We must avoid the perception of great-power chauvinism.”
While reiterating that the digital Yuan was not meant to replace the dollar, Zhou went into the benefits of the new digital currency. According to the former PBoC governor, the digital Yuan enabled both payments and currency conversations in real-time.
“If the currency exchange is realized at the moment of a retail transaction, and there is oversight of that exchange it brings new possibilities for interconnection.”
Zhou mentioned that most cross-border payments involving Chinese consumers were already cashless. Though credit cards as well as solutions like WeChat, and Alipay are already serving Chinese clients well, the digital Yuan will bring in additional benefits such as transparency and real-time processing.
As China makes progress on its digital currency, some financial expert in other countries have lamented about their country’s lack of urgency when it came to developing CBDCs. Some have even expressed fear that China’s CBDC would replace the dollar. Zhou’s comments will either serve to allay some fears or will push countries like the US to come up with digital cross-border solutions as well.
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