Forbes has an article that describes the history of Chinese currency policy in detail, as well as talks about the current state of the digital Yuan.
The US Dollar Is The Real Target
China is reportedly launching a test of its e-Yuan platform in four major cities. The country will be able to use the technology, eventually, to grow the international use of the RMB as a reserve currency, used in countries where it is not the dominant form of cash.
China has made efforts to expand the Yuan’s penetration in the past, using things like “Dim Sum bonds” – bonds that were in another currency, but counted in Yuan. Major western corporations have taken these bonds in the past.
The new era of digitized currency could lead to other such applications. The possibilities are an open book.
It’s relatively easy to make grand predictions about the e-Yuan and its implications for Bitcoin. As our own Mark Hunter points out, there’s currently little reason to believe that China actually poses a threat to Bitcoin – at least from its treasury. Bitcoin and the e-yuan are two remotely different things, but that doesn’t mean the Chinese central bank won’t get the idea eventually to find ways to bully BTC.
In an effort to bolster its digital currency, there are areas of cryptocurrency that the communist regime could impact, such as mining. Simply banning the manufacture or export of crypto mining equipment, a totally realistic move, could have a huge impact on destabilizing crypto in the long term.
The e-Yuan and Bitcoin
The long-term prospects of Bitcoin are bright, and the advent of government-backed digital currencies can go one of two ways.
In one scenario, more people become interested in Bitcoin, as they get comfortable with digital currencies through the government-issued versions. Who knows when the United States, Great Britain, or other western countries will follow the path carved by China.
In another scenario, Bitcoin and other cryptocurrencies have a harder time getting adopted, as they are seen as redundant thanks to the introduction of government digital currencies.
In still another scenario, China and other countries creating their own digital currencies have no impact on Bitcoin at all. This is the one I find least plausible, since at the very least Chinese investors will likely have an easier time transmitting their money to overseas exchanges as a result of the e-Yuan.
If China were targeting Bitcoin for displacement and disruption, the country would likely have a more comprehensive approach. More than just testing and launching its own digital currency, they’d actively be attacking parts of the Bitcoin economy in China and abroad.
So, no, I don’t think China is trying to displace Bitcoin, or crypto in general, with its e-Yuan efforts. Instead, I think it’s targeting the US Dollar, as Mark Hunter and others have pointed out. The digital RMB already has more legitimacy than things like USDCoin, which are issued by private companies – that plus its portability will be a huge attraction.