President Joe Biden’s administration is reportedly troubled by the long-term effects a digital yuan may wear on the dollar’s status as the global reserve currency.
In line with a recent official report by Bloomberg citing anonymous sources, officials at multiple government departments are increasing efforts to raise understand possible threats posed by China’s initiative.
Officials at the United States Treasury, State Department, Pentagon, and National Security Council are reportedly unfazed by the short-term impacts a digital yuan, or DCEP [China’s digital currency electronic payment] system, might wear the dollar status.
Challenges to the United States’ global reserve currency status over the long-term, however, are a serious concern. Officials have begun ramping up their efforts to know how the digital yuan is going to be distributed and whether it works around trade sanctions, consistent with the report.
China began developing its DCEP system with the involvement of the nation’s leading state-owned banks as well as payments giants Tencent and Ant Financial earlier in 2019, as reported earlier.
The project has since skilled multiple test runs including gifting digital red packets of cash to citizens via a lottery that was then spent at participating stores in select cities across China.
Because of these moves, China’s financial institution is positioned to be the primary major financial institution to issue a digital currency, giving the DCEP a headstart, a plus that U.S. officials are beginning to worry about also, as reported at that time.