China’s central bank digital currency is generally identified as a form of challenge to the dominance of the US dollar, not Bitcoin (BTC). But it can be difficult to find adoption in niches where crypto versions of the dollar, mainly Tether (USDT), are thriving.
At the Unitize panel on Monday, Charles Yang of Genesis Block explained why DCEP, commonly known as the digital yuan, is not particularly attractive as a replacement for a crypt currency.
According to one expert, China’s digital yuan will target the dollar, not Bitcoin
Speculation and payments
Yang identified two key drivers for the adoption of cryptomonies, specifically in Asia. The first is speculation, noting that traders in countries such as Korea and China are more likely to take risks. But beyond that, the borderless nature of crypto currencies is especially useful to Asian traders:
„Any country that has these capital limitations – Korea is large, obviously China is another important one – [where] people simply cannot go through regular banking channels to send money to a different country. …] This is the main case of the use of cryptomoney at the moment.
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From that perspective, a centralized, bank-issued digital currency may not be a good replacement for the USDT, as Yang believes that the rules for capital controls will „not change.
He also raised a major concern about the internationalization of the DCEP and how other countries may react:
„For example, if China launches DCEP in its blockchain, and they want other countries to accept it, these new countries need access to those data.
Whether China’s central bank would be willing to share that data with other countries remains an open question.
„The development phase of the Digital Yuan has been completed,“ says a central bank official.
Tether would still be king, for now.
Yang explained that the USDT is finding immense popularity in Asia, as hundreds of millions of dollars are exchanged every day. Despite previous concerns about its reserves, confidence among traders remains high, especially within the hour or day.
According to him, China cannot easily reduce the circulation of Tether in the country, despite the threat it may pose to capital controls and supervision.
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On the other hand, DCEP would have to establish itself in the main markets and exchanges of crypto-currencies to start disputing the dominance of the USDT:
„It’s just a means of moving value. That’s the most practical way to look at it: „If you accept it, how fast and reliable can you download it without a big sacrifice?“
He added that, in the case of the Hong Kong-based Genesis Block, he would accept it easily because „many people have renminbi liquidity needs. But in the case of other countries and continents, some may refuse to have any exposure to the yuan.
Therefore, the lack of global adoption could make it difficult for China to take control of the crypto-currency ecosystem through the digital yuan, at least for now.