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Soon after taking office, US President Donald Trump issued an executive order prohibiting the establishment, issuance and use of central bank digital currencies (CBDCs) in the country. The order aims to protect Americans from CBDCs which the Trump administration sees as a threat to “the stability of the financial system, individual privacy, and the sovereignty of the United States”.
In contrast, China’s pilot programme for the digital yuan launched in 2019. By early 2022, 261 million people had created an e-CNY digital wallet. This reflects a broad trend in digitalisation in China: instead of paper money, WeChat Pay and Alipay are now the default payment systems.
In 2022, the e-CNY pilot programme was expanded to include Hong Kong. The Hong Kong Monetary Authority has also worked on a CBDC exchange system encompassing Thailand, the United Arab Emirates and mainland China.
Some warn that the digital yuan could be part of a strategy to displace the dollar as the world’s dominant reserve currency, given China’s status as the top trading partner for most countries and the world’s largest bilateral lender.
Others say such fears – or ambitions – are unrealistic. For one, the yuan has a lot of ground to make up: the dollar constituted 57 per cent of global cash reserves, followed by the euro at 20 per cent, while the yuan was a distant 2 per cent in the third quarter of 2024.
Another obstacle to this goal is China’s caution over running current account deficits or having an open capital account that allows the free movement of capital overseas.
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