Sounds like its CBDC is unlikely to dethrone the United States dollar as the world’s reserve currency anytime soon.
David Roche, president and global strategist at Independent Strategy, believes that China’s digital yuan has “a long way” before it will become able to challenge the U.S. dollar as a reserve currency, CNDC reports Nov. 2.
According to Roche, China’s central bank digital currency, or CBDC, could hypothetically beat the U.S. dollar as a reserve currency, but it would take a “very, very long time.” The strategist reportedly emphasized that the euro accounts for a “miserable” 18%–20% of all global trade, while the Chinese yuan composes 2% of international trade settlements. He said:
“Dethroning the dollar — which the euro tried to do, and settled at a miserable 18–20% of all the international things that go on — is very, very difficult. […] There is a certain amount of illusion at the moment that the yuan — which accounts for 2% of international trade settlements and even less if you come to financial investment flows — that this can take over.”
Roche also stressed that the U.S. economy has been shrinking in the last 20 years. However, the dollar is an “increasing proportion of the settlement of international trade and an even bigger proportion of financial reserves,” the strategist noted.
Roche’s remarks come shortly after Jerome Powell — the U.S. Federal Reserve’s chairman — declared that the U.S. government is not worried about China getting a first-mover advantage when it comes to issuing CBDCs. According to the official, the U.S. will be focused on “getting it right” rather than trying to be first with CBDC.
At the same time, a number of industry experts expressed concerns over the U.S. dollar being at risk of losing its status if its digital version does not launch soon. In October 2019, Christopher Giancarlo, former chair of the Commodity Futures Trading Commission, argued that the dollar could lose status in the future due to other countries actively experimenting with CBDCs.
On Oct. 20, Anthony Pompliano, a co-founder of major cryptocurrency firm Morgan Creek Digital, argued that the U.S. is going to fall “really far behind China” if the country keeps delaying its digital dollar initiative.
Source: , CoinTelegraph
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