A Chinese finance expert is suggesting that China should expand its digital yuan to compete with the growing influence of US dollar-backed stablecoins. This comes after President Trump voiced support for dollar-pegged stablecoins, aiming to solidify the US dollar’s global standing.
The Threat of US Dollar Stablecoins
Zhang Ming, deputy director of China’s National Laboratory of Finance and Development, argues that the dominance of US dollar stablecoins could significantly enhance the dollar’s global power. He believes that these stablecoins, by linking the dollar’s international credit to the digital world, could cement the dollar’s hegemony.
China’s Response: Expanding the Digital Yuan
To counter this, Zhang proposes a significant expansion of the digital yuan’s reach. He suggests broadening its use from simply replacing cash (M0) to encompass demand deposits (M1) and potentially all deposits (M2). This wider adoption, he believes, would boost the digital yuan’s domestic and international use, ultimately promoting the internationalization of the Chinese currency (renminbi).
Developing Chinese Stablecoins
Furthermore, Zhang advocates for accelerating the development of Chinese stablecoins. He envisions these stablecoins being used extensively on internet platforms, effectively linking the renminbi’s sovereign credit to the global reach of Chinese online platforms. He believes that this strategy, if properly managed, could significantly improve the renminbi’s international standing and provide a robust counter to the influence of US dollar stablecoins.
A Multi-Currency Future?
Zhang concludes that a diverse digital currency landscape, with multiple national fiat-backed cryptocurrencies, is preferable to a scenario where the US dollar dominates the digital asset market. He believes this would create a healthier and more competitive global financial system.
