As the discussions get more and more fractious between the Worlds two largest economies, China are wisely making some real moves to steal a march on their US counterparts with the launch of their digital Yuan or as it is formally known DC/EP.

It is no secret that China have been trying to make inroads into USD supremacy for years but the currency juggernaut of global trade is so deeply embedded within all financial systems that it has been near impossible to usurp the Dollar with fiat. It now absolutely makes sense that China would want to make their move into the digital currency sphere with their National currency digital equivalent.

Digital Yuan to shake up USD dominance?
Digital Currency Shake Up coming?

Digital Yuan is not a ‘Bitcoin-type’ cryptocurrency

We need to note that DC/EP is not to be used in the same way as Cryptocurrencies such as Bitcoin for speculative or investment purposes but as a transaction currency that will be bad news also for all those Libra fans out there who were expecting Facebook to be the master of digital currency.

China will not be alone in launching a national Cryptocurrency. There are many other nations with plans to float their own online currencies but by being the first of the big guns to the table should definitely give China an advantage in taking some market share with their Digital Yuan. Add to the fact that China is the largest global exporter and it would make sense that they will be looking for trading partners to utilise their digital currency in transactions and moving away from some dollar denominated agreements.

The infrastructure for digital payments in China is not new. AliPay, WePay and others have already paved the way with local China transactions growing from a total $956million in 2017 to $1.6trillion in 2019 and an estimated 20% growth again in 2020. This effectively doubles the digital payment transactions in 3 years with $2trillion in estimated transactions set for this year.

The Chinese state also has a vast number of employees in the public sector and we would imagine that making these transactions with digital Yuan will be one of the first steps made to integrate the currency into the hands and devices of the local populous and simultaneously reduce their own costs to handle these transactions.

This puts China in the rather unique position of being able to test their digital Yuan with sufficient volume locally to ensure it is perfected before the other superpowers even get started.