China is increasing its efforts to strengthen its digital yuan. It aims to challenge US dollar-pegged stablecoins in world trade. According to a recent report by a Chinese media outlet, the Chinese Communist Party is concerned about the US’s growing interest in stablecoin development. The report by the deputy director of the National Finance and Development Laboratory (NFDL) alerted that US stablecoins have the potential to reshape global financial markets. Therefore, China shall accelerate the adoption of CBDC, China’s central bank digital currency, to compete equally with US stablecoins. China says US stablecoins are a financial threat. The recent report elaborated on three types of digital assets. These three groups include Bitcoin, stablecoins represented by USDT and USDC. The third category is CBDC, which is represented by RMB (e-CNY). The report says, “The nature of Bitcoin is not a real currency but a peculiar financial asset, which itself has investment value.” It further explains the digital asset’s dual nature. Due to its high price fluctuations, it is a risky asset. Despite its volatility, Bitcoin has shown a tendency to move inversely to the US dollar exchange rate Therefore, some investors see Bitcoin as a hedge against fluctuations in traditional fiat currencies, especially the US dollar. The report added that stablecoins may have the most impact on the international finance system among the three categories. This is because stablecoins depend on sovereign currencies and have similar financial characteristics. Therefore, US stablecoins are backed by the dollar and benefit from its stability. This means stablecoins share the same level of acceptance for international investors. This underlines the fact that the stablecoin market has crossed a $200 billion market cap this year. For this reason, Chinese leaders insist that it is time for the digital yuan to evolve to match the competition. China shall expand the reach of the digital yuan outside of retail China was the first country to launch CBDC. However, the government has kept the transactions limited to the retail sector only. The report says that if China wants its CBDC to compete with US stablecoins, it must broaden the use of its digital currency beyond consumer purchases. To be exact, the report talks about expanding the digital yuan’s exchange range “from M0 (cash) to M1 (cash plus demand deposits) and even M2 (cash plus all deposits) as soon as possible.” This will enable the digital yuan to be widely accepted in local and foreign markets. The report also calls for China to have its own stable digital currency and urges an overall increase in the use of digital tokens on online platforms. Moreover, it also pushes for the seamless use of digital yuan with global applications. Recently, the ECB also addressed the necessity for Euro stablecoins. The chief economist Phillip Lane said during a speech that “The digital euro would provide a secure, universally accepted digital payment option under European governance, reducing reliance on foreign providers.” He also discussed tech giants like Apple Pay, Google Pay, and Paypal dominating digital payments in Europe. This signals that Europe is losing financial independence to US-based companies. His statement followed Michael Saylor’s post , which said, “EUR gonna need BTC.” Cryptopolitan Academy: Tired of market swings? Learn how DeFi can help you build steady passive income. Register Now
