As bitcoin continues to show resilience and build a resume of success – no hacks, continued growth on the stock market – superpowers are taking notice.
China isn’t waiting on the cryptocurrency wave. It wants its digital currency now.
For now, it is testing the technical feasibility of issuing, distributing and redeeming a central bank digital currency (CBDC), according to the Bank of Japan.
Across the globe, many central banks are seeking to develop digital currencies to modernize their financial systems.
As far as China is concerned, a cyber yuan gives Beijing power to track spending in real time – and it isn’t linked to the dollar-dominated global financial system.
This so-called cyber yuan is a government-sponsored digital currency designed to track the movement of every penny unlike bitcoin, which promotes anonymity.
China’s version of a digital currency is controlled by its central bank, which will issue the new electronic money.
This has to be a concern for the U.S. financial system because Beijing is positioning the digital yuan for international use and designing it to be untethered to the global financial system.
The U.S. dollar has been the financial de facto king of the world since World War II.
So, how big a problem could this become for American financial interests?
According to industry experts, digitization wouldn’t by itself make the yuan a rival for the dollar in bank-to-bank wire transfers, but it could gain traction on the margins of the international financial system.
China is moving quickly.
In a not-too-distant future, China may require everyone to use the digital currency; paper money will be invalid.
And, talk about Big Brother, the country will know who is paying, where they are paying, and how much they are paying — and what they are buying.