China Issues National Cryptocurrency

By:
Chris Gaetano
Published Date:
Apr 7, 2021
GettyImages-1223350580-yuan-digital-currency

Cryptocurrencies have come a long way since the early days of Bitcoin, when all one could buy with them was black-market items and the occasional pizza: China has now become the first major nation state to issue an all-digital currency in a move that is likely to challenge the dollar's global dominance, the Wall Street Journal reported.

The currency, still called the yuan, exists entirely as lines of computer code, compared to the nondigital version. Unlike most other cryptocurrencies that we know of today, this one will be controlled by the country's central bank, which will be able to closely monitor the activities of Chinese citizens. That is because, unlike most other cryptocurrencies, it is not anonymous.

The currency, which is slated to be used mostly for international transactions, is completely unmoored from the global financial system, which is dominated by the U.S. dollar, effectively setting up a parallel structure. This is not a bug but a feature, as the Journal said that much of the marketing behind this new digital currency has been about breaking U.S. power: it would enable people to evade U.S. sanctions, hide their activities from U.S. regulators, and provide an alternative for banks that would prefer not to deal with the United States, as dollars could be sidelined from international transactions using the digital yuan.

Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell said that the U.S. government is studying the issue in earnest, including the possibility of one day issuing a digital dollar.

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