As China accelerates its push for a digital yuan, there has been plenty of speculation that it will replace the dollar, but SEC officials recently said China’s digital yuan won’t disrupt the greenback.
China’s planned digital yuan won’t replace the U.S. dollar, a senior Securities and Exchange Commission official said Thursday, citing the growing use of dollar-backed stablecoins.
The world’s largest central banks, including the People’s Bank of China and the US Federal Reserve, are stepping up the issuance of digital currencies, with an eye to improving payment systems and hoping to capitalize on the rise of cryptocurrencies.
The People’s Bank of China’s work on the digital yuan — promoting currency internationalization — is far ahead of similar efforts in other major economies.
That has led some analysts to question whether faster growth in China, the world’s second-largest economy, will allow the renminbi to gain dominance over the dollar. The dollar remains the world’s dominant reserve currency.
However, Hester Peirce, a Republican commissioner at the US Securities and Exchange Commission, said the rise of stablecoins, privately issued cryptocurrencies that are often backed by dollars, will maintain the dollar’s role.
“Even in 2021, stablecoins have had huge growth — these are basically private digital dollars,” she said. “This could actually be our answer to China’s CBDC [central bank digital currency]. It could just be a private stablecoin.”
“If they’re backed by the dollar, then I think the dollar will still be pretty important,” Peirce said at a digital currency event.
Jerome Powell, chairman of the US Federal Reserve, said on Wednesday that China’s digital renminbi programme would not prompt the US central bank to accelerate its digital dollar programme, stressing that its main aim was not to speed up the rollout to market but to avoid any missteps in digitising the dollar.
Stablecoin is only a fraction of the size of Bitcoin, the largest cryptocurrency.
Tether, the largest dollar alternative in the crypto world by market capitalization, has a market value of about $51 billion, compared with bitcoin’s $1 trillion. Like Bitcoin, TEDA remains rarely used in commerce.