A Messagepoint board member and portfolio investor said China’s state-owned digital currency could undermine the U.S. dollar’s role in international trade in the foreseeable future.
Paul Melchiorre said he sees great potential for central bank digital currencies (CBDC) in the international financial market.
From an investor’s perspective, what will be crucial to society’s adoption of CBDCs will be the realization that state-stablecoins are not a bubble inflated by futuristic promises, but a financial product built on familiar national currencies backed by a central bank and government.
“Even though e-CNY is still in pilot mode, the Chinese digital currency has already shown significant reach, with transaction frequency demonstrating a focus on global dominance,” Paul Melchiorre cites a report that over $10 billion worth of transactions were recorded on the e-CNY system in 2022.
Paul Melchiorre recalled that the digital yuan was introduced to the world at last year’s Beijing Olympics and quickly gained multi-billion dollar traction thanks to the PRC government’s active promotion policies.
“We are witnessing a fierce battle between the U.S. and China over whose money should be the world’s settlement currency for trade transactions,” the businessman believes.
According to the investor, without the U.S. creating effective competing systems, China could “force trading partners to use its digital payment system,” replacing the U.S. dollar and jeopardizing the benefits the United States derives from the popularity of its national currency.
In early May, France’s BNP Paribas announced to cooperate with the Bank of China and introduce a digital yuan settlement program for corporate clients.