China's digital yuan is touted as a powerful challenger to the US's global dollar dominance, but not as a direct competitor to cryptocurrencies. However, Chinese central bank digital currencies (CBDC) may find it hard to see adoption in niches where the dollar-pegged stablecoins already have a foothold, primarily Tether's USDT.
Speaking during the Unitize panel held on Monday, Genesis Block’s Charles Yang, gave reasons why digital yuan might not be attractive as a crypto replacement.
Speaking to Bitcoin Exchange Guide, Yang explained that there are two main aspects driving crypto adoption in Asia. First, speculation, stating that there is a large number of investors particularly from China and Korea who like taking risks. In addition, Asian traders also enjoy the borderless nature of cryptos. He explained:
“Any country that has these capital constraints — Korea is a big one, China's obviously another major one — [where] people just can't go through regular banking channels to send money to a different country. This is the major use case of crypto right now.”
In this regard, Yang argues that a centralized as well as bank-issued digital yuan might not be a superb replacement to USDT. Yang states that the set regulations for capital control will still apply.
Yang also brought the issue of internationalization of CBDC’s and the way other nations may react. He explained that if China introduces a digital yuan within their own blockchain insisting other nations to accept it, those nations will need to access the data. Yang remains sceptical on whether the Chinese central bank will be ready to offer the data to other nations.
Yang stated that USDT will remain to be popular in Asia as lots of dollars are being traded each day. Traders’ confidence has been boosted in the recent past in regards to its reserves.
The expert opines that digital yuan will need to establish itself among bigger crypto markets as well as exchanges for it to compete with USDT.
Lack of adoption by other countries can also make it hard for the digital yuan to have a major threat to USDT.