- China’s development of their digital yuan has continued in recent weeks, leaving western nations floundering
- The digital yuan will soon be accepted on Beijing’s subway and rail systems, and soon Chengdu’s transport system
- Western countries should be worried about the threat from the digital yuan, according to some
China’s sovereign digital currency has pulled away from the competition in recent days, showcasing the desire for China to take the lead on Central Bank Digital Currencies (CBDCs) and leaving western nations floundering. The digital yuan, which debuted in October last year, is now accepted on certain Chinese public transport facilities following its use in a retail setting, marking the next step in adoption. Other countries such as the U.S. meanwhile are still in the early consultation phase, putting them years behind China. These developments have prompted more warnings that the U.S. risks being dethroned in the battle for global financial supremacy in the coming years.
China Perfectly Placed to Push CBDCs
The digital yuan has always been the leader of the CBDC revolution, with the Chinese government realizing the potential of a sovereign digital currency as far back as 2016. It helped that the country was already largely cash free, which meant the move from online fiat payments to truly digital payments was not as big as it would be in other countries. Nowhere is this more stark than in the U.S. where paper checks and cash are still heavily used on a daily basis, representing a heavy ideological barrier as well as a technological one.
Trials of the digital yuan in a retail environment in Shenzhen last year were the first real world tests of the new CBDC, a rollout that has now moved into the transport arena, with Beijing’s subway system accepting the digital yuan as payment on 24 lines and four suburban railway lines also accepting it. Reports also suggest that the city of Chengdu has finished integrating the digital yuan and also aims to support public transport payments soon.
U.S. Should be Worried by Digital Yuan
The U.S. should be worried by the rapid acceleration of the digital yuan program, according to Kyle Bass, chief investment officer of Hayman Capital Management, who told CNBC recently that “the digital yuan is the largest threat to the West that we’ve faced in the last 30-40 years”.
The U.S., like many western countries, is lagging behind China when it comes to developing a CBDC, although head of the Federal Reserve Jerome Powell met with Coinbase CEO Brian Armstrong and former CFTC chair Chris Giancarlo in May to discuss the plausibility of a digital dollar.