Investment expert Ray Dalio believes that China and the United States' CBDCs, the digital yuan and the digital dollar, will fight a power battle in the coming years, but that the digital yuan is the one that could emerge as the winner.
Ray Dalio, an American billionaire hedge fund manager and philanthropist, founder of the company Bridgewater Associates, notes that the digital yuan could beat the digital dollar as a reserve currency, since by its design China's digital currency could become much more significant and attractive than the digital dollar in the coming years.
What we inspect with the "El Bailador" road simulator: interview In CBDC, Ray Dalio expressed that it is possible to see the yuan as the next global reserve currency, surpassing the US dollar. Ray Dalio bases his assessments on the progress and development that the Asian power has in terms of the design and issuance of a central bank digital currency, known as CBDC.
US rival China has been developing a CBDC for its national currency, the renminbi, also called the yuan, for over 6 years to boost its global leadership and become an increasingly strong and powerful economic reference point, while the United States is just beginning to accept the need to issue a CBDC for the dollar.
In addition to this, Ray Dalio noted that China's design and plans for the digital yuan can make this currency more viable, attractive and profitable for international investors, who could eventually end up adopting the currency as the main reserve of value in the world.
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The possible role of the yuan in the coming years
For the billionaire investor, the yuan's role in the global economy could grow much further in the coming years with the arrival of its blockchain-based digital form, to the point of becoming a more widely used currency internationally.
Dalio said more global financial and commercial transactions could be denominated in digital yuan in the coming years, making the Chinese currency “a more viable investment alternative” for many globally.
Dalio even thinks that the accelerated pace of development that China is maintaining with its future CBDC digital currency could make it begin to compete Bitcoin (BTC) as an investment alternative; although it is worth remembering that the digital yuan will be backed by the country's central bank as a digital currency with a value linked 1:1 to its current fiat money, so that this CBDC will function as a stable value currency, without the potential for revaluation that bitcoin shows over time.
Digital Yuan vs Digital Dollar
Although Ray Dalio believes that both currencies, the digital yuan and the digital dollar, can compete in the future, the vice governor of the People's Bank of China, Li Bo, said in April that China's intentions with its digital yuan were not to reduce the dollar's dominance in the global economy, but rather that it was a currency for "domestic use."
Li Bo said that the internationalization of the national currency will be a natural process, but that the launch of the digital yuan is not intended to replace the US dollar or any other currency in the international market.
“I think our goal is to allow the market to choose, and to facilitate international trade and investment,” he pointed.
China prepares for another test of its digital yuan
As the planned launch date for the digital yuan approaches, China is accelerating pilot testing to ensure it tests its digital currency in as many environments as possible before it goes to market.
China's central bank, the PboC, is implementing a new public test, where it will give out another $6,2 million worth of digital yuan to Beijing residents, informs CNBC. The new public test will benefit some 200.000 residents of the capital, who have until June 7 to register for the new lottery and participate to receive a digital red packet with 200 digital yuan, which they can spend in different stores.
The Asian powerhouse plans to launch its digital yuan at the 2022 Winter Olympics in February, an event that will be attended by thousands of people from around the world. China wants to allow foreigners to use its digital yuan for purchases made in its various stores.
Meanwhile, as mentioned, the US Federal Reserve (FED) is still debating the implications of issuing a central bank digital currency on its economy, although it noted that several trials will be launched this year. pilot programs that will evaluate the performance and viability of a CBDC within the US economy.
Digital currencies, the future of the global economy
China and Sweden are the countries with the greatest progress in developing a CBDC, after the Bahamas, which has already launched its Sand Dollar on the market.
The progress of these countries is prompting more to join the global race for CBDCs, as an innovation that will facilitate cross-border transactions between nations, guarantee the monetary policies of each one and promote financial inclusion and the provision of more accessible and affordable services for their citizens. Elvira as Nabiul, governor of the Russian central bank, considers that the benefits that central bank digital currencies will bring will make them “the future of financial systems.”
Continue reading: The US FED wants to lead international regulation of CBDCs
