The administration of the U.S. President Joe Biden is reportedly monitoring the research and development stages of China’s DC/EP stablecoin. Experts believe the Chinese central bank digital currency (CBDC) to undermine the U.S. dollar’s dominance and open new opportunities for China to bypass trading bans.
It seems that officials from the U.S. Department of Treasury, State Department, Pentagon, and National Security Council are closely watching for the potential implications of the new currency, as well as the methods of distribution and how the DC/EP could find a way around U.S. sanctions.
China, in the face of the People’s Bank of China (PBoC), has already rolled out several pilot programs across major Chinese cities, putting PBoC closer to become the first national bank deploying a CBDC. Transactions across the pilot programs already reached millions denominated in U.S. dollars, meaning that China is working progressively on a broader launch. Meanwhile, rumors are suggesting the upcoming Winter Olympics in Beijing for a possible broader roll-out, which would grant the digital yuan an international exposure.
However, many of the DC/EP specifications still remain unavailable to the public, including the means of distribution. Some experts speculate about China’s partnership with cross-border settlement system SWIFT, which could mean the DC/EP would work in line with the current financial system rather than outside of it.
Still, the US is more concerned about the digital yuan China gaining more control in a dollar-dominated world, but Chinese officials denied the plans of using the digital yuan to avoid U.S. sanctions. The main intention of the DC/EP, according to the officials, is the replacement of banknotes and coins, as well as to complement the current electronic payment systems like Alipay and Tencent’s WeChat Pay.
“To provide a backup or redundancy for the retail payment system, the central bank has to step up and provide digital-currency services”, the director of the PBOC’s digital-currency research institute, Mu Changchun, noted.
Meanwhile, China’s efforts of launching the world’s first central bank digital currency have put stress on the U.S. government, especially when other countries like Japan, France, and Australia are researching possibilities for currency digitalization. Russia, for example, plans to launch a digital ruble trial program in 2022.
Despite the U.S. government still not feeling enough anxiety to take immediate action into dollar digitalization, Treasury Secretary Janet Yellen stated that “it makes sense for central banks to be looking at [CBDCs].” Yellen’s opinion coincides with former CFTC Chairman Christopher Giancarlo’s plans of doing what the U.S. government still hesitates to do – a digital dollar. Giancarlo is leading the Digital Dollar project, in cooperation with IT giant Accenture, which has already advised financial institutions like the Bank of Canada and European Central Bank on digital currencies.