China's central bank is making impressive strides in creating its own digital national currency. At the same time, US officials are getting deeply concerned about the country's success in this regard, considering the digital version of the yuan a serious potential threat.
The White House is increasing its scrutiny of China's plans for its virtual currency, trying to weigh all the risks of lagging behind in this race. According to Joe Biden's advisers, the launch of the digital yuan could kick off a long-term bid to displace the dollar as the world's dominant reserve currency. In addition, the US administration is extremely concerned that the digital yuan could help China evade US sanctions. This in turn could undermine the key diplomatic leverage Washington needs to exert pressure on Beijing.
Currently, only 27 countries are looking at issuing their own digital currencies. This list includes Sweden, the EU, Japan, Russia, and, of course, China, a world-beater of this race. The position of the United States in this ranking is not yet clear. From a technical point of view, the country is ready to introduce a digital dollar. However, from a legal standpoint, its prospects are dismal. The Fed cannot proceed with this without support from Congress.
Meanwhile, Beijing is stepping up its efforts and approaching the finish line. The local authorities are confident that the digital yuan will considerably reduce the country's reliance on the US dollar as well as the impact of global inflation on its economic development. China’s virtual currency is supposed to be similar to non-cash money in terms of functionality. However, it will be the third type of payment methods in addition to the existing cash and non-cash funds.
