The Chinese currency yuan could be used globally because of the proposed launch of a digital currency by China, said the CEO of American cryptocurrency financial services firm Circle.
Its own digital coin is being planned to be launched by China’s central bank the People’s Bank of China (PBOC) where in a two tier system would be put in place which would allow the central bank and the other commercial banks to be legitimate issuers of the digital coin.
This announcement was made by the PBOC last month and said that the launch would take place soon. The central bank has said that protecting its foreign exchange sovereignty is the rationale behind the move.
“I look at this really meeting several goals. But, I think the bigger opportunity here is this is a way for the Chinese yuan to be distributed globally,” Circle CEO Jeremy Allaire said in a television interview.
“This becomes a mechanism by which (the yuan) can be used in everyday transactions all around the world,” added Allaire, an internet entrepreneur who also founded video streaming firm Brightcove. “It’s ultimately a foundation for the internationalization” of the yuan.
In recent years, China has made a conscious effort to prompt the use of its currency yuan by more international entities outside of the country.
According to the IMF, about 58 per cent of all foreign exchange reserves in the world are made in US dollars and that makes it the “reserve currency” of the world currently. Further, about 40 per cent of the total debt in the world is dominated in US dollars also.
The new proposed digital coin by the PBOC will have close similarities with Facebook’s proposed digital coin the Libra, Mu Changchun, deputy director of the PBOC’s payments department, had said earlier. he claimed that the safety and security of the digital coin would be as good as paper notes issued by the central bank and the new proposed currency could be put to use on online digital platforms such as Tencent’s WeChat. It can even be used by people without an internet connection.
Relatively stable government-backed money would be backing the Libra which Facebook had unveiled in June this year. Facebook has said that its currency would not be as volatile and speculative as the likes of bitcoin and other cryptocurrencies,
China’s proposed digital currency “bypasses the Western banking system, SWIFT, things like this”, pointed out Allaire. He was talking about the Society of Worldwide InterBank Financial Telecommunications based in Belgium which makes possible sending and receiving information on cross-border payments for financial institutions.
He said that the digital currency is “quite strategic.” Authorities would be able to track monetary supply more easily, Allaire added, and said that which would give Beijing the mean s to tackle problems such as corruption and money laundering.
(Adapted from CNBC.com)