Expert: Digital Yuan Will Have a Hard Time Displacing Tether in Asia

Published at: July 6, 2020

China’s central bank digital currency is usually identified as a way to challenge the dominance of the U.S. dollar, not Bitcoin (BTC). But it may struggle to find adoption in niches where crypto versions of the dollar thrive, primarily Tether (USDT).

At the Unitize panel on Monday, Charles Yang from Genesis Block explained why the DCEP, commonly referred to as digital yuan, is not particularly attractive as a crypto replacement.

Speculation and payments

Yang identified two key drivers of crypto adoption, specifically in Asia. The first is speculation, noting that traders from countries such as Korea and China have a higher tendency to take risks. But beyond that, crypto’s borderless nature is especially useful for Asian traders:

“Any country that has these capital constraints — Korea is a big one, China's obviously another major one — [where] people just can't go through regular banking channels to send money to a different country. [...] This is the major use case of crypto right now.”

From that perspective, a centralized and bank-issued digital currency may not be a good replacement to USDT, as Yang believes that the rules for capital controls “will not change.”

He also raised an important concern for the DCEP’s internationalization and how other countries may react:

“For instance, if China launches DCEP on their blockchain, and they want other countries to accept it, these new countries need access to that data.”

Whether China’s central bank would be willing to share that data with other countries remains an open question.

Tether to remain king, for now

Yang explained that USDT is finding immense popularity in Asia as hundreds of millions of dollars are being traded every day. Despite previous concerns about its reserves, confidence among traders remains high, especially within timeframes of hours or days.

According to him, China cannot easily curtail Tether circulation in the country, despite the threat it may pose to capital controls and oversight.

On the other hand, the DCEP would have to establish itself in major crypto markets and exchanges to begin contesting USDT’s dominance:

“It's just a means of moving value. That's the most practical way to view it: ‘If you accept it, how quickly and how reliably you can offload it without a great sacrifice?’”

He added that in the case of the Hong Kong-based Genesis Block, it would readily accept it as “plenty of people have renminbi liquidity needs.” But in the case of other countries and continents, some may refuse to have any yuan exposure at all.

Thus, lack of global adoption could make it difficult for China to take control of the cryptocurrency ecosystem through the digital yuan — at least for now.

Tags
Related Posts
Chinese online retail giant JD.com adopts digital yuan for salary payments
JD.com has been using China’s Digital Currency Electronic Payment, or DCEP, system to pay the salaries of some employees since January. The e-commerce firm revealed the news on Sunday while announcing its participation in the one-year DCEP trial show at the fourth Digital China Summit in Fuzhou slated for Sunday and Monday. Commenting on its digital yuan adoption journey, the company stated that apart from paying staff salaries, JD has also utilized the DCEP in business-to-business payments to partner firms as well as cross-bank settlements. As previously reported by Cointelegraph, JD Technology and Digital Currency Research Institute — the company’s …
Business / April 26, 2021
Starbucks and McDonald's Rumored to Be Testing China's Digital Currency
Rumors are surfacing of an upcoming real-world test of the proposed Chinese digital yuan currency. According to Chinese publication Interchain Pulse, a promotion conference was held on April 22 in the city of Xiong’an, located close to Beijing. Government agencies, digital currency developers and merchants participating in the upcoming pilot were invited. The initiative is part of the Xiong’an Smart City program. It began on September 25, 2019 as an association of enterprises, higher education institutions, research institutes and technology companies. Its board of directors includes companies like Huawei, Tencent, Alibaba Group, Baidu and others. The conference was thus joined …
Business / April 23, 2020
Digital yuan transactions beat out Visa at Winter Olympics venue: report
On the day of the opening ceremony of the Beijing 2022 Winter Olympics, there were reportedly more transactions made in China’s central bank digital currency than those through Visa. In a Wednesday report from the Wall Street Journal, a person familiar with the matter said transactions in digital yuan significantly outnumbered those of Visa on Feb. 4 at the Beijing National Stadium, also known as the Bird’s Nest — the location of the opening ceremony of the 34th Olympic Winter Games. However, many of the retailers allowing purchases with China’s central bank digital currency, the digital yuan — or e-CNY …
Business / Feb. 10, 2022
China's central bank includes digital yuan in report on currency circulation
The People’s Bank of China, or PBoC, has begun including the country’s central bank digital currency, the e-CNY, in reports measuring the amount of currency in circulation. According to a 2022 financial statistics report released on Jan. 10, the PBoC said there was 13.61 billion digital yuan — roughly $2 billion at the time of publication — in circulation as of Dec. 31. The currency in circulation grew at a rate of 15.3% in December 2022, with the broad money supply reported to be 266.43 trillion yuan. The PBoC reported adding the digital yuan to its figures had not caused …
Business / Jan. 11, 2023
Chinese Communist Party officials issue KPIs for e-CNY transactions in Suzhou
According to local news outlet JS China, on Feb. 1, an annual meeting regarding the trial of the digital yuan central bank digital currency (e-CNY CBDC) was attended by senior Communist Party officials in the City of Suzhou. As part of the meeting outcomes, party officials have set a tentative key performance indicator (KPI) of 2 trillion CNY ($300 billion) for e-CNY CBDC transactions in the city by the end of 2023 to be implemented by municipal administrators through promotional efforts. Officials have also set a target of processing $30 billion in e-CNY loans for small and mid-sized businesses in …
Blockchain / Feb. 2, 2023