The digital dollar could become a viable currency, but the digital yuan would be more competitive on price and yield. This was stated by Ray Dalio, founder of Bridgewater Associates, according to The Block.
According to him, the problem with the American CBDC lies in the country’s rising national debt. The digital form of the Chinese yuan, by contrast, would become a “very viable alternative” for many investors if adopted globally, says the founder of Bridgewater Associates.
Dalio noted that the digital yuan will compete with Bitcoin, an ‘alternative currency’. But DCEP will not fully capture the cryptocurrency market, he added.
The billionaire also allowed that the Chinese yuan could be used more often in trade and financial transactions. He said the national currency of the PRC would become a reserve currency sooner than expected.
“I think this will gradually happen faster than most people expect. Much of it is not only about what China does, but what the dollar does,” Dalio said.
According to IMF data, the dollar is currently the world’s largest reserve currency with a share of nearly 60%. The yuan’s share stands at around 2%, behind the euro, the Japanese yen and the British pound.
Dalio did not rule out that the share of the Chinese currency could rise to around 10-15% in five to ten years.
Earlier, former head of the People’s Bank of China Zhou Xiaochuan said that the national digital currency is not intended to replace widely recognised fiat money—the dollar and the euro.
Since 2020, authorities in several Chinese cities conducted several experiments with the distribution of DCEP among the population.
In February 2021, a branch of the Agricultural Bank of China in the “megacity of the future,” Xiong’an in Hebei province developed a hardware wallet for the digital yuan.
In May, it became known that online bank MyBank would allow some customers to perform DCEP operations in the Alipay app. In the same month, Hong Kong authorities announced the expansion of the testing programme for the asset.
The chairman of the United States Federal Reserve System Fed Jerome Powell stated the possibility of issuing a CBDC and reminded that what matters is to do it right rather than competing with other countries.
Later, member of the Board of Governors Lael Brainard called the United States’ involvement in setting the asset’s standards “vital” in order to “play a leading role in cross-border payments and to occupy a position as a reserve currency”.
Summer 2021, the Fed will publish a discussion paper that would supplement the previously initiated research into the feasibility of creating a digital dollar .
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