At the 2022 Winter Olympics, China rolled out the digital yuan for foreign attendees, where it has seen limited use due to entrenched digital currencies and Visa, as well as lack of publicity. The digital yuan is part of China’s long, uphill battle to replace the Dollar with the Yuan as a global reserve currency.
“Digital, cashless payments have been the modus operandi of the majority of Chinese consumers, growing rapidly year over year,” said Khurram Adhami, a partner & growth lead at DAO PropTech. “This then, seems more like a control game, than an adoption push. Digitizing currency gives central banks complete, and total control; It’s not only easier to print/mint more money, but it also makes it possible for the People’s Bank of China to destroy money.”
Adhami added that the digital yuan will allow China and the People’s Bank of China to capture transaction and financial data, to be monopolized by the government, and since the People’s Bank of China is playing the role of the central party here, the financial privacy of the users is in their hands.
“This is at odds with the core of cryptos; pseudo-anonymity and decentralization,” said Adhami. “To some, this greater control equips the People’s Bank of China to crack down on money laundering, and track illegal activities. Like every technological breakthrough, this has the potential to make lives better or worse, depending upon who wields that power. It’s not the technology that’s inherently good or bad, it’s the usage.”
The recession caused by COVID across the globe is a validation of the inefficacies in the existing economic system and according to research, more than 85% of the central banks worldwide are already researching or piloting their own CBDCs in the race of building the next global reserve currency. Digital Yuan, along with other CBDCs, represents the final battle to retain control and repel the imminent process of democratization of the global monetary system.
Alibaba and the International Olympic Committee both launched NFTs for the event.
It remains to be seen whether other organizations will in the future embrace NFTs to further engage fans. The IOC’s play-to-earn NFT game is not available in China, where the event took place.
“Non-fungible Tokens (NFTs) have been picking up steam since early 2021 with no end in sight,” said Adhami. “NFTs represent unique digital ownership on the blockchain and play an imminent role in proving digital scarcity, uniqueness, and transfer of value. Look beyond the hype, and we see that an NFT is more than just unique digital ownership of assets; It represents community, culture, and a sense of belonging.”
By pairing these with skyrocketing valuations for some NFT projects, Adhami expects to see celebrities investing in NFTs to sports clubs launching their tokens to incentivize supporters and promote loyalty towards the club, everyone wants to take a slice o the pie. It is only a matter of time before new marketing paradigms will emerge around NFTs and brands will start to focus on building communities, culture, and engaging with their customers around NFTs rather than existing as faceless organizations.
Chinese authorities have cracked down on the crypto industry fourteen times so far. It is possible that these crackdowns were tied to the launch of the digital yuan.
“China’s effort to assert control of the crypto revolution has much deeper roots than the emergence of the digital yuan,” said Adhami. “Although it has embraced technology as a force for aggressive development, China has been criticized for its over-paternalistic policy stance resulting in compromise of privacy and personal freedom for individuals at times.”
Challenging how money works, cryptos have found opponents everywhere, from liberal western democracies to the socialist regime in China, which is least expected to ever adopt the democratization of this space. In fact, the core value system proposed by Web 3.0 is a direct adversary of the Chinese socio-political system.
“Although CBDC does provide the ease of digital money transfer system and record-keeping, it does not empower people through frictionless, immutable, and decentralized creation of monetary value,” said Adhami. “Although cryptocurrencies might have triggered the launch of the digital Yuan, they are in different spaces. It is in no way a direct competition.”
US lawmakers warned athletes against using the digital yuan
Given the stance of US lawmakers on Huawei and TikTok, it should come as no surprise that the US doesn’t trust hardware or software coming out from China, even as the world superpower uses apps to spy on its own citizens and the world.
“The established narrative around the digital yuan is that the enablement of cross-border payments will add fuel to the fire of terror financing and money laundering. However, a different way of approaching this would be to analyze history and the rise of Dollar Supremacy. Since the abandonment of the Bretton Woods system in 1971, the US Dollar has slowly become the dominant global reserve currency with many of the international trade prices being quoted in USD.”
Adhami believes that the digital yuan is an attempt toward dethroning the USD from its existing position and championing the status of becoming the global reserve currency of the world. This is a direct threat to the US financial system and puts a question mark on the power of the US. The cross-border digital transactions of CBDCs would not only challenge the supremacy of the dollar but is also a cause of concern for regular citizens.
While one superpower will roll out its CBDCs with a first-mover advantage, the other will take its time and then impose sanctions on the winner, thus displaying its selective mindset on when capitalism applies to itself or not.
