Sino Global Capital CEO thinks the new digital yuan and CBDCs will challenge global dollar payment systems
Matthew Graham, CEO of Sino Global Capital, recently told Boxmining founder Michael Gu that the next digital yuan will be geared towards the hegemony of the dollar, not Bitcoin.
The digital yuan is part of a new central bank digital currency (CBDCs) that China is expected to launch in the coming years.
According to Graham: “Swift, CHIPS, Fedwire (…) they are old-fashioned, they are expensive, they are slow. It is 2020 and we have transactions that take three days to complete and that are much more expensive than they should be. All of these technologies that underpin much of the global USD-centric economy are really showing their age. So this is a great opportunity. "
The global USD-based financial system has been in place for many decades, with little competition to spur new innovations. China's CBDC could therefore be offered to trading partners as an alternative to the old dollar clearing platforms.
China's digital yuan has potential
With basically no competition in the market, USD-based systems like SWIFT have remained unchanged for many years.
Unlike modern clearing systems such as Visa, SWIFT can take days to deliver money from one country to another, regardless of whether it is a 100% digital transaction. DCEP is expected to be much faster than existing systems and will completely bypass the established Western financial system.
Graham commented: "If you are approaching this (DCEP) from a cryptocurrency or blockchain framework, I think you will really have a hard time understanding what it is and why it is so important."
The president of the China International Economic Exchange Center mentioned this aspect of DECP in a previous statement: “DCEP can obtain real-time collection of data related to money creation, accounting, etc., providing a useful reference for providing money and the implementation of monetary policies “.
The global settlement policy
If a CBDC is able to impact the way people and institutions move money, it could become another controversial issue between the U.S. and China. Both global powers are already fighting over trade, Taiwan, Hong Kong and global health issues – so a competing system of global solutions could further disrupt US-China relations.
One challenge that a CBDC may face is that of international acceptance. Chinese client states, which depend on China for financing, may be persuaded to accept the digital yuan as payment. However, it remains to be seen whether third-party economic blocs, such as the EU, are so willing to do business outside the established system.