The Digital Yuan Could Be Just The Shake Up Needed to Democratize International Commerce And Dislodge The Dollar from Dominance

• The Digital Yuan Could Be Just The Shake Up Needed to Democratize International Commerce And Dislodge The Dollar from Dominance
  by Bradley Blankenship, https://www.rt.com/
  China is the only major economy to introduce a blockchain-enabled, digital version of its currency, the yuan, which may someday change the entire landscape of global trade. Right now, it’s only in a limited (albeit national level) test phase but Chinese officials hope to have it fully ready by the 2022 Winter Olympics set to take place in Beijing.
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  Unsurprisingly, the US is taking a hard look at what exactly this might mean for the future. As RT reported this week, top US officials see the digital yuan as a potential threat to the dollar’s status as the world’s reserve currency and think it could help China and other countries bypass US sanctions. They are even reportedly considering a digital dollar to compete with it.
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  For starters, the digital yuan is not like other cryptocurrencies that, as of now, essentially function as highly volatile digital assets. The basic principles of cryptography are the same, but the digital yuan is just like the normal one for all intents and purposes. It’s run by the country’s central bank and circulates alongside bills and coins. Whenever a digital yuan is created it essentially cancels out a physical one.
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  What it really represents, at its core, is another step in the internationalization of the yuan. And why this is so important has to do with the makeup of the current status quo.
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  About 90% of foreign-exchange transactions involve dollars, over 60% of all global central-bank reserves are held in dollar-denominated assets and almost 40% of the world’s debt is issued in dollars. All of this is part of what former French President and Finance Minister Valéry Giscard d’Estaing described as the dollar’s ‘privilège exorbitant’ (exorbitant privilege).
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  The widespread use of the dollar allows the US government to have a firm grip on the international banking system and, when combined with the fact that it can monitor any transaction using the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network, means it can weaponize international commerce through, for example, unilateral sanctions – like those against Syria, Iran, Cuba and others.
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  The US is very aware of the fact that the ubiquitous use of the dollar and its grip on international banking gives it a privileged position in shaping international events. A feature by the Wall Street Journal on April 5 underscores just how important the dollar’s reign is to Washington.
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