China has made significant progress in the development of central bank digital currency [CBDC], becoming the world’s first major economy to pilot a digital currency. Even so, as per a new report, the digital yuan is not the topmost CBDC in the world or in Asia.
According to the latest report by PricewaterhouseCoopers [PwC], China is third when it comes to project maturity, behind the Bahamas with the Sand Dollar and Cambodia, with project Bakong.
The report also mentioned that the digital version of the Bahamian Dollar as well as Cambodia’s DLT-based interbank payment system is either accessible to all the residents via the mobile application, physical payment card, or already is tied up with domestic commercial banks and payment processors. But China is still at the advanced level of trial.
China’s Digital Yuan Might Not Be Able to Tip Dollar’s Supremacy Just Yet
Despite popular notions about Digital Yuan, there are other CBDCs at the global level that require attention. Many market commentators have previously speculated China’s digital yuan to be a huge threat to the dollar. The digitization of China’s yuan has been a thing of global fascination especially in the backdrop of a flourishing cryptocurrency market. With regards to political implications and as well as the new economic levers that digital yuan might generate for the government domestically as well internationally, were also given adequate food for thought.
However, a senior Bank of Japan official recently downplayed the potential for China’s digital yuan to threaten the dollar’s position as the world’s main reserve currency. Kazushige Kamiyama, who happens to be head of the BOJ’s payment systems department and the individual who is tasked with looking into a virtual Japanese currency stated,
“The dollar’s status as the key global currency won’t change so easily. In fact, the dollar’s advantage may strengthen further if the U.S. goes with digitalization.”
Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics, also noted that despite China’s massively-hyped digital currency advances, the digitized yuan is yet to prove to be cheaper, more efficient, more private, or more convenient than the existing domestic and international payment systems. While addressing the “threat” to the USD, Chorzempa added,
“[It is] unlikely to represent any more a threat to the dollar’s international dominance than the current forms of RMB, at least over the short and medium-term”