China poised to beat US in digital currency race, admits Bank of America

(Karachi) Foreign exchange analysts at Bank of America said that China's initiative to introduce digital version of its yuan will surely disrupt the US dollar's dominant role in global finance. They admitted China is poised to beat the US in digital currency race and it could have a major impact on US dollar as a dominant currency for international payments and central bank reserves.

In a report published on June 30, Bank of America analysts stated that China is ahead of the US in developing a central bank digital currency, or CBDC.

In 2019, America's Federal Reserve Chair Jerome Powell told Congress that the central bank failed to identify potential material benefits of a general-purpose digital dollar which provided an edge to China to roll out its digital currency.

Analysts said, “China seems likely to have a clear first-mover advantage in its adoption of CBDCs, both in terms of timing and usage.” They added, "A digital yuan could increase the Chinese currency’s use in international commerce “even if it doesn’t immediately disrupt the USD’s dominant role in global finance.”

The Bank of America report comes as China’s digital yuan gained attention from top monetary economists and cryptocurrency-industry executives.

Economists and analysts were of the view that China's digital version of its currency – also known as the renminbi, or RMB – could reduce the importance of US dollar as global reserve currency and harm its dominant role.

“The present-day experience is more of discord and less in favor of multilateralism. We are seeing more rivalry in areas such as trade and technological dominance,” analysts wrote in the report.

They concluded that China's RMB is gradually capturing the international market but its growth rate is not rapid as many people have thought.