US wary of China's digital yuan currency

China's bid to have a digital currency could soon become the next point of contention with the Biden administration, adding to the several points of friction languishing between the top two economic and military powers.

China's bid to have a digital currency could soon become the next point of contention with the Biden administration, adding to the several points of friction languishing between the top two economic and military powers. Amid concerns over rapidly rising Chinese prowess in technology and innovation, Washington is working towards a digital dollar.

A central bank digital currency of China presents risks to privacy and cybersecurity and it could create fear about data collection methods, regarding who has access to the data, and wonders if privacy protections would be provided, said Stephanie Segal, senior associate of the economics program at the Center for Strategic and International Studies. China invested a lot of effort and capital in the last two decades, in the bid to become a global reserve currency. According to the Canadian think tank IFFRAS, the current reserve currency, the United States Dollar (USD), came into place at the end of World War II as a "testament" to the allies' victory.

However, China has begun to threaten its hegemony, according to chinausfocus. "Recently, China has entered into talks with Russia and Saudi Arabia to purchase oil in the Chinese Yuan. This commodity has been reserved for the USD since the 1970s, so closely tied to oil that it has taken on the name of petrodollar," the influential open platform website on the bilateral relationship.

"China's growing financial influence and ability to challenge the Dollar as a global reserve currency can be traced to its advancements in electronic and mobile payments, adoption overseas, and the development of a central-backed digital currency that can operate without ever touching the US financial system," the report added. The Canadian think tank contended that a Chinese-backed digital currency and its blockchain would open the door to an increased surveillance into every financial transaction that a user makes.

The report added that this would allow the Chinese Government to know how much someone is making. Chinese establishment will also keep track of whether people are paying the right taxes or not. According to the chinausfocus, "this control of the blockchain in the digital yuan would also enable the Chinese government to change many concepts of how crypto-currencies work.

"It would be able to fork (changing the base code) the blockchain at will or even reverse transactions that weren't favourable to itself. Which means, the biggest challenge the digital yuan poses to the US financial system is that it doesn't need to interact with it at all," it adds. (ANI)

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)