The Hong Kong Monetary Authority (HKMA) and the People’s Bank of China (PBoC) have entered into a collaboration to examine the digital Yuan for conducting cross-border transactions. The tests are being conducted in mainland China. The Head of Research at the PBoC, Wang Xin, expressed his interest in the tests and said that the rising market demand could only be met by conducting cross-border transfers in digital Yuan or Central Bank Digital Currency (CBDC). The Chinese economy is slowly witnessing the emergence of stablecoins and cryptocurrencies as a new class of assets. The gradual infusion of cryptocurrencies into China’s economy would reduce the use of sovereign currency and have a profound impact on the financial operations of the central bank.
China is on the highest pedestal in the digital currency space. The Chinese government is putting in a significant amount of effort to make more initiatives than the United States in the cryptocurrency world. China’s economy is heavily dependent on electronic transactions, and therefore the advent of the digital Yuan adds to its success. The digital Yuan’s launch shall also furnish the Chinese Government with an overview of its citizens’ spending pattern. Moreover, the digital Yuan shall also enable China’s currency to acquire international recognition through fast and low-cost cross-border transactions. Today, Yuan is almost as economically competitive as the US Dollar, although the latter is the world’s reserve currency dominating international commerce. Despite the competition pit up by the Chinese digital Yuan, the Federal Reserve officials are taking it slow at the digital currency arena.
The Head of Digital Assets Research at Fundstrat, David Grider, believes that the USD’s role and power cannot be affected by the advent of the digital Yuan in the cryptocurrency space. However, economists think that there is a risk of the US falling behind the world economies if the importance of digital currencies is completely ignored. There is no denying that China’s leadership in the Central Bank Digital Currency space shall put up a tough competition with the US Dollar when it comes to making cross-border transactions. It is being anticipated that the digital Yuan’s influence shall dominate the economic sphere of Asia more than in other continents.