Could China’s digital renminbi pose the US dollar a challenge?
- Beijing may need to fix its policy mix before its first-mover CBDC can gain reserve-currency status
Globally, as many countries are progressing on their central bank digital currency (CBDC) research, important questions have arisen. As China began testing a digital version of its renminbi (units of which are measured in yuan) in major cities last year, interest in CBDCs has gained global attention, especially the potential impact of this exercise on the internationalization of the renminbi. The digitalization of China’s currency, combined with other economic developments there, has led many to wonder if it will pose a challenge to the hegemony of the US dollar as a reserve currency. While such arguments may seem far-fetched now, one can’t deny that CBDC developments may prove transformative for the international economy.
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