Some countries swore to cut down their dependency on the US dollar by 80 percent. This set some of the world's most powerful economies into a frenzy towards de-dollarization. By 2015, most transactions in bilateral trade were conducted through the US dollar. Efforts by financial alliances have however seen a drop from 90 percent usage of the dollar to 51 percent across China and Russia.
China's DCEP Main Design Focuses on De-dollarization
Zhou Xiaochuan, a former governor of the People's Bank of China said the major designing point of the digital yuan focused on enhancing de-dollarization. The underlying infrastructure is focused on implementing global policies that prevent dollarization such as sharply decreasing US debts, increasing non-dollar commodity trading, growing reserves in non-dollar currencies, removing the US dollar's status as the main anchor currency and increasing hedge for gold against the US dollar.
Xiaochuan noted China's digital currency is going to support the country's domestic retail system and protect the economy from dollarization. While speaking at the Eurasia Forum conference back on October 27, the ex-governor said they were building a digital currency that is different from the G7. This includes France, Canada, Italy, Germany, the US and the UK. Zhou Xiaochuan is currently the president of the Chinese Finance Association.
Reduce Dollar Domination in the Chinese Retail Market
He went on to add that the G7 was only concerned with challenges raised by coins such as Libra or Bitcoin. On the other hand, the People's Bank of China was creating a digital payment system for retail to transact domestically and prevent domination of the US dollar across its retail markets.
Xiaochuan emphasized their principles for the DCEP differ widely from the concepts of the G7. Hence, they were going to keep on pushing and working to make the DCEP a success.
G7 Will Oppose all Global Stablecoins
A press statement released by the G7 on October 12 announced they would restrict any global stablecoin without appropriate regulatory oversight. This was while expressing their undying concern with the launch of Facebook's Libra coin and terming it as a great threat to the financial ecosystem.
However, China's stand remained solid on their concerted efforts to reduce the dependence of the US dollar as a medium of exchange. In fact, according to the Financial Times, China and Russia have been drastically reducing their usage of the dollar since 2015. The outbreak of the US-China trade wars further intensified these efforts creating a concerted effort between China and Russia to move away from the anchor currency.
Canada and its CBDC
China is not the only nation considering a stablecoin. Canada's central bank is also drafting its own CBDC. The Governor of the Central Bank Tim Macklem said central banks required a coordinated strategy for developing a digital currency. One that would be bulletproof from the nuisance of cybercriminals.
China's central bank has on the other hand launched its acid test for the digital currency electronic payment (DCEP). The program distributed $1.5 million across 47,500 people in Shenzhen. The Central Bank has however not officially released the CBDC.
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