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Is the end of the dollar’s dominance coming? – An alternative could be “digital yuan”…

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The use of financial sanctions as a weapon creates a new impetus for China and Along with China, other countries to them snowcan be appliedk are looking for ways to minimize the impact of financial sanctions…

The proliferation of the “digital yuan” is becoming more and more a reality. To Russia snowSanctions have begun to have a more serious impact on this process.

Unprecedented militarization of the financial system

From the war started by Russia in Ukraine and Western governments are afraid of being involved in the war with the Kremlin snoweconomic and tightened financial sanctions. It is true that sanctions against Russia were applied before the war, but now the scope of these sanctions has been greatly expanded.

USA and allies Russia Central bankThey froze most of the country’s reserves by imposing sanctions. Also a number Russia Banks have been banned from accessing the international money transfer system SWIFT. In the process, the world learned a new term, desvifting and The world financial system has become an unprecedented weapon.

For now Russia against these bans Putin mode and how influential he is in his policies and It is difficult to say that it is effective. However, in all cases, there is no doubt that these sanctions will seriously damage the Russian economy over time.

Russia, meanwhile, is the main target of Western sanctions against the Kremlin’s aggressive policy and It does not affect Belarus, but other countries are asking themselves that, if in the future their governments cross the “red line” of the United States, dollars Can they be excluded from the international financial system based on? Saudi Arabia and Chinese politicians have long been concerned about the weakness of the United States in the face of financial “weapons.”

A new Chinese version of SWIFT can be created

I don’t know if there is an equivalent of the term “desvifting” in Chinese. But the Chinese People BankFormer US President Zhou Xiaochuan spoke about the risks that US sanctions could pose to China and To prevent this, he considered it important to expand the use of the yuan in world markets. Some experts also believe that, If China takes any action against Taiwan, Beijing will face similar sanctions.

In recent years, the Chinese government has taken some steps to prevent this risk. For example, China has created its own system (CIPS) in the same format as SWIFT for international money transfers. and is currently urging its trading partners to use the yuan in international money transfers. CIPS is evolving rapidly and The giant banks of the great West are also involved in its work. However Ukraine At the beginning of the war, CIPS turnover was only 1% of SWIFT turnover.

If Russian banks excluded from SWIFT join the system, CIPS operations will increase. Despite all this, CIPS says that the amount of money transfers is very small according to There will be no major changes in the international money transfer system. She according to nor does CIPS pose a threat to the Western payment system, which currently has global hegemony. However, the development of the “digital yuan” could pose a more serious threat to this system.

Why is the West afraid of digital currency?

Central banks of many countries are currently working on the introduction of digital currency and can be said of cash payments in this area that, Although Sweden, which does not use it, is more advanced, China is a leader in this field with its huge economy.

Europe and US central banks are cautious about digital currencies. In addition to the technical problems associated with the digital currency, there is also the issue of privacy that, this problem seems more serious. Because the center of all the money they spend Bank Citizens may not like being run by. This issue is not so important for the Central Bank of China.

Recently, the Hoover Institution reportwas shown in that, The widespread use of the digital yuan “will lead to the excessive strengthening of authoritarian regimes.” That’s it according to also consider in the West that, The issue of the international impact of digital currency is more important than the issue of internal control.

China’s leadership in the field of digital currency could greatly expand the use of the yuan abroad and China’s “One Belt, One Road” project is currently in China national further expands the coverage of the currency.

Ukraine of the Hoover Institution, published just before the start of the war reportwas also reported that, If Beijing can achieve “digitalization” of world trade flows, then the effectiveness of the use of US financial sanctions will decrease. Let `s note that, The United States has played a significant role in the creation of private cryptocurrencies. This speculative tool allows individual experienced spies to earn more. Nevertheless, this physical with cheaper cryptocurrencies in China and is a leader in the payment system between legal entities and it also plays a role in the real sector. Probably that, The United States will have to learn from this experience.

DollarProphecies about the “death” of God have already been repeated. This is also true that, in world currency reserves dollarsvolume of 2020If in 2007 it was 71%, now this volume is 60%. She according to Although there are few signs that the dollar is coming to an end, the trend is changing. The use of financial sanctions as a weapon creates a new impetus for China and Along with China, other countries are looking for ways to minimize the impact of possible financial sanctions against them. This is serious for the world financial system and can have long-term consequences.

Toyo Keizai, Japan, 10 May, 2022
Author: Howard Davies (Translation: Pia)



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