President Joe Biden’s administration is reportedly troubled by the long-term effects a digital yuan may have on the U.S.’s status as the world’s reserve currency.
According to a Sunday report by Bloomberg citing people “familiar with the matter,” officials at multiple government departments are increasing efforts to better understand a possible threat posed to the U.S. dollar by China’s initiative.
Officials at the U.S. Treasury, State Department, Pentagon and National Security Council are reportedly unfazed by the short-term impacts a digital yuan, or the digital currency electronic payment (DCEP) system, may have on the dollar.
Challenges to the U.S. global reserve currency status over the long-term, however, are a major concern. Officials have begun ramping up their efforts to understand how the digital yuan will be distributed and whether it works around trade sanctions, according to the report.
China began developing its DCEP system with the involvement of the country’s largest state-owned banks as well as payments giants Tencent and Ant Financial in 2019, as CoinDesk reported at the time.
The project has since gone through multiple test runs including gifting digital red packets of money to citizens via a lottery that was then spent at participating stores in select cities across China.
Because of these moves, China’s central bank is positioned to be the first major central bank to issue a digital currency, giving the DCEP a head start, an advantage that U.S. officials are starting to worry about as well, the report said.
See also: China Proposes Global Rules for Monitoring CBDCs
