GBIChina | Will digital RMB be an opponent of the US dollar?
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Will digital RMB be an opponent of the US dollar?

The Russian Economic Today evaluated the possibility that digital RMB will replace the US dollar in the international market in 2021. Economists have assessed that whether the digital RMB could stand firm in the international market in the future depends on various factors.

There are thousands of digital currencies in the world. New kinds of digital currencies are born every day. The world’s well-known digital currencies include Bitcoin, Ethereum, Ybcoin, Ruitaicoin, Dogecoin, etc. At present, there are more than 1,600 kinds of digital currencies circulating in China. Today, the Chinese government is constantly promoting new technology products to the financial system, which is threatening the dollar’s former status step by step.

Digital RMB will become one of the influences, not only because of its rapid development, but also because of the long-term use of Federal Reserve Communication System (Fedwire), Society for Worldwide Interbank Financial Telecomm (SWIFT), and the New York Clearing House Interbank Payment System (CHIPS). The payment system for international settlement is outdated, slow, and expensive, and the US dollar is severely affected. The digital currency issued by the People’s Bank of China will be able to compete against the US dollar.

Digital currency replaces banknotes

China has been studying various solutions for the financial market for a long time. The difference between the digital RMB and cryptocurrencies is that cryptocurrencies are under the control of the People’s Bank of China. Cryptocurrency is a type of digital currency, which has more advantages than paper money. If it is favored in China and has more than 1 billion potential users, other Southeast Asian countries may also use digital RMB in the future.

The researcher at Taihe Institute has made predictions. He believes that in the next 10 to 15 years, the digital currency will replace paper money. The financial sector will undergo profound changes during this period, and a cashless society will be formed.

The U.S is self-destructing dollar credit

At present, the United States is flooded with political and social contradictions, and the raging of the coronavirus and the impact of the economic crisis emerged. Such speculation is becoming more convincing.

Experts predict that if the second wave of epidemic comes, investors are more likely to give up the dollar. He said that the United States lifted the prevention and control measures with the epidemic situation did not improve. They are eager to restore social order. Such an approach is likely to go astray. When looking into the medium and short-term prospects, various factors must be considered. Of course, the US dollar is not vulnerable. The US dollar is not only a payment and settlement tool but also a currency in which the transaction process between all countries in the world can be realized.

The prospects of RMB attract attention

When the coronavirus began to wreak havoc around the world, investors will usually think that dollar was better than the currencies of Britain, Japan, Switzerland, and Canada. Investors often turn toward the US dollar when they are uncertain because the US dollar has a relatively successful status as the world’s reserve currency. Although the Fed is not the first time to raise the US Treasury debt limit and issue currency without restraint.

The situation in previous years shows that actually there is no alternative currency that can compete against the US dollar. Of course, the opponents of the US dollar do not use it for trade settlement. But in the context of the increasing distrust of emerging countries in many Western countries, their total volume cannot change the principles and mechanisms of international trade.

Some recent emergencies have also affected the use of digital RMB. Chinese applications such as TikTok are blocked in India and the United States. Social media is an important medium and carrier for popularizing and promoting cryptocurrencies. Banning the APPs may hinder the penetration of cryptocurrencies in traditional financial markets. And also go against the sinking of emerging asset classes in the investment market.

The obvious case is Dogecoin. Dogecoin’s trading volume surged by nearly 2000% in early July. The price rose by more than 20% in 24 hours, and the market value increased by $70 million. All this is related to a challenge video on the TikTok. A TikTok user named James Galante posted a short video titled “Let’s Get Rich”. In the video, he recommended that everyone invest $25 in Dogecoin because the token is currently worth less than a penny. And if it rises to $1, investors will get $10,640.

Affected by the video, the global search for “how to buy Dogecoin” has skyrocketed in the past few days. The video received over 57100 likes and 4000 comments.