The global economy is in the early days of digitalizing currencies. Central banks worldwide are either in the infancy period of transitioning to digital money or deliberating digitalization’s pros and cons. After a couple of trials in the post-coronavirus recovery, China is placing its bets on the digital yuan, advancing its scope and reach to become the kingpin of fiat money. But market analysts are only now beginning to show an interest in the virtual yuan, potentially out of fear that it could threaten and undermine the U.S. dollar and inflate its standing among international reserve currencies. Is this a positive step in the diversification of currencies, or will it be more of the same big-government economics? Whatever the case, the red dragon continues to expand its fiery breath across the globe.
Digital Yuan: What You Need to Know
In 2014, the People’s Bank of China (PBoC) began studying the creation and implementation of a digital yuan. Six years later, the central bank began rolling out various digital yuan trials in multiple cities with different companies, including McDonald’s, Starbucks, and Subway, participating in the test run. Authorities distributed “red packets” containing 200 yuan ($30), available on a mobile phone or a card. The money appears on a screen with the image of Mao Zedong, resembling physical cash. The digital yuan is programmable, and the government has tested expiration dates, which would be beneficial to stimulate an ailing economy. Overall, it would be an effective totalitarian tool to monitor the economy and the people.
Despite some hiccups, including notable amounts of fraud, officials liked what they saw. Beijing now plans to expand issuance ahead of next year’s Winter Olympics. While several details remain in limbo, the government has stated its objective for the yuan: prevalence and domestic dominance.
Today, many cross-border transactions are settled in dollars. China aims to change that by having cross-border settlements denominated in yuan. Meanwhile, the central government and the PBoC want to eliminate the incentive to utilize cryptocurrencies by having a digital yuan complement the broad array of electronic payment systems, such as Ant Group’s Alipay and Tencent Holdings’ WeChat Pay.
Chinese officials claim that they are not trying to dismantle the global currency system with a digital yuan. Former central bank head Zhou Xiaochuan told a Shanghai forum in December that technology is the primary objective for the government, not currency supremacy. He alluded to payments and currency conversions occurring in real-time.
Even if these leaders’ intentions are benign, it is difficult to fathom how a country that possesses a social credit system would not abuse a digital yuan for surveillance purposes and treat its undesirable citizens like lepers. And this is what would make the digitalization of currency a terrifying threat.
Biden Sees Long-Term Threat
The Biden administration is monitoring the increased rollout of the digital yuan. Officials are concerned that it could be a part of a long-term initiative to topple the good old buck as the world’s international reserve currency. Reports suggest that leaders at the Treasury, State Department, Pentagon, and National Security Council are attempting to understand the implications of Beijing bolstering the digital yuan. For now, authorities are not too concerned about the currency being used to skirt U.S. sanctions. But the more they understand the digital yuan, the better the chance of a digital dollar coming soon?
A Digital Dollar Is Born?
Federal Reserve Chair Jerome Powell revealed to lawmakers during his semi-annual testimony that the institution is studying a digital dollar. Powell noted that he is more focused on getting it right than being the first. He also told 60 Minutes in a recent interview that the issue of a digital dollar is something for Congress and the public to address:
“We have not made a decision to do this because, again, the question is will this benefit the people that we serve? And we need to answer that question well. And we need to involve the public and Congress deeply in that process, because it would be an important step if we were to do this.”
Treasury Secretary Janet Yellen has been enthusiastic about the prospect of digitalizing the dollar, explaining that “it makes sense” for central banks to start issuing sovereign digital currencies that address the various problems within the financial sector. Many countries, from Sweden to the United Kingdom to Canada, are already ahead of Yellen as they have started studying the implementation of a digital currency.
War on Cash in the Great Reset
Could the digital yuan replace the greenback? It is unlikely. However, the yuan’s ubiquity could intensify in the years to come, which is already evident in the quarterly International Monetary Fund’s (IMF) Currency Composition of Official Foreign Exchange Reserves data updates. As Liberty Nation has reported over the years, there is a coordinated effort among America’s adversaries – and even allies – to limit the dollar’s reign as currency king. The de-dollarization push could escalate in the Great Reset, leaving behind a trail of ripped-up dollars that could eventually become worthless if the Federal Reserve maintains its ultra-aggressive monetary expansion endeavors. This is the beginning of more countries embracing central bank digital currencies (CBDCs) to trample on civil liberties and economic freedoms. Perhaps it is time to start hiding cash in your cookie jar or burying it in the backyard. Too many governments will eventually exploit digital money for iniquitous means.
Read more from Andrew Moran.