China’s central bank digital currency is generally identified as a form of challenge for the dominance of the US dollar and not Bitcoin (BTC). However, it can be difficult to find acceptance in niches where crypto versions of the dollar thrive, especially in Tether (USDT).
On the unitize panel on Monday, Genesis Block’s Charles Yang explained why DCEP, commonly known as the digital yuan, is not a particularly attractive substitute for cryptocurrencies.
Speculation and payments
Yang identified two main drivers for the introduction of cryptocurrencies, especially in Asia. The first is speculation that traders in countries like Korea and China are more likely to take risks. In addition, the limitlessness of cryptocurrencies is particularly useful for Asian traders:
“Any country that has these capital constraints – Korea is big, obviously China is another important one – [donde] People simply cannot send money to another country through regular banking channels. […] This is currently the main use case for cryptocurrency. “
From this perspective A centralized digital currency issued by banks may not be a good replacement for the USDT, as Yang believes that capital control rules “will not change.”
He also expressed great concern about the internationalization of DCEP and how other countries could react:
“For example, if China starts DCEP on its blockchain and other countries want to accept it, these new countries need access to that data.”
It remains open whether the Chinese central bank would be willing to share this data with other countries.
Tether would be king for now
Yang said the USDT is immensely popular in Asia with hundreds of millions of dollars exchanged every day. Despite previous concerns about their bookings, merchant confidence remains high, especially within hours or days.
According to him China cannot easily reduce Tether’s circulation in the country despite the threat to capital controls and supervision.
On the other hand, the DCEP would have to establish itself in the most important markets and exchanges for cryptocurrencies in order to deny the dominance of the USDT:
“It is only a means to move values. This is the most practical view: “If you accept it, how quickly and reliably can you download it without much sacrifice?”
He added that in the case of the Hong Kong-based Genesis Block, he would readily accept this because “many people have a need for liquidity for renminbi”. However, in the case of other countries and continents, some may refuse to be exposed to the yuan.
So, The lack of global acceptance could at least initially make it difficult for China to take control of the cryptocurrency ecosystem via the digital yuan.