The digital yuan will be a control tool for China

The transaction history that China would maintain with the arrival of its central bank digital currency (CMBD) will allow for a national financial data registry; and with potential use in surveillance and state control over citizens. Different experts have spoken about it and consider that The digital yuan can be a tool of surveillance and control over Chinese citizens. In addition, they insist that this is a great threat to the future of the hegemony of the US dollar worldwide.

Experts in the field agree that China could use its power to contrast financial information of its citizens with other factors or data and thus be able to apply restrictions or authoritarian measures.

The Communist Party of China (CPC) recently issued a warning to Mongolian families; and has threatened them that if they do not send their children to State schools, they will be included on a blacklist. In this sense, it is important to know that with the Digital yuan could hold government information and combine financial data with such lists.

Although it is a tool that the government claims to use as a means to address corruption and other similar problems; Most likely, these financial surveillance capabilities will be a problem for citizens, who will clearly see their privacy diminished. In fact, this is one of the main drawbacks that many see in this type of central bank digital currencies.

The digital yuan system could allow for a predictable and programmable economic policy, in addition to implying a lower cost per transaction for those merchants who use this CBDC. However, it can be used as a financial surveillance tool, even for exclude individuals and businesses from the financial system for having committed some type of infraction.

Digital yuan as a substitute for the dollar

On the other hand, it is necessary to remember that The digital yuan is a threat to the dollar. Although it does not seem likely that, in the short term, a Chinese currency will be able to displace the US currency, at least in the short term; the exchange between countries based on their CBDCs can reach break the hegemony of the dollar as a common currency when carrying out international trade.

In this way, there will be many countries that want to reach agreements to exchange CBDC currencies among themselves. If this exchange of digital national currencies becomes possible on the same platform, The dollar could lose space against the digital yuan.

China has proven to be more technologically innovative than the United States. If this also happens with blockchain technology, the US economy risks missing out on the next wave of data innovation. Therefore, when launching a digital dollar, financial data must be considered; and this implies knowing how to use them to achieve a strengthened economy and maintain the country at maximum economic competitiveness. And furthermore, The privacy of citizens must be respected.

China understands the potential of cryptocurrencies but prefers to make light use of them or only to the point where their objectives can be met. At the same time, they will continue to develop the digital yuan focused on evade financial sanctions and create a monetary system that has a global reach.

All of this is in conflict with the political values ​​that predominate in the United States; and this has caused confrontations between representatives of both countries. In fact, the US does not like the use of the digital yuan in the Winter Olympics.