The digital yuan will not dethrone the U.S. dollar, according to SEC commissioner, Hester Pierce. Despite the fact that the People's Bank of China (PBOC) is currently leading the CBDC race as it extends the trials of digital yuan to more cities and even across borders in Hong Kong.
The People's Bank of China and the U.S. Federal Reserve, are stepping up their game in issuing their own digital currencies amid the rise of the cryptocurrency market.
Despite China leading the digital currency race, analysts are of the view that the digital yuan could gain dominance over the world's leading reserve currency, the U.S. dollar.
However, SEC Commissioner, Hester Pierce thinks otherwise. According to her, the rise of stablecoins won’t let that happen, as it would maintain the U.S. currency's status, adding:
"Even in 2021, there's been tremendous growth in stablecoins, these are essentially private digital dollars. That, effectively, maybe our answer to the Chinese CBDC. It may be just private stablecoins."
According to the IMF, the dollar accounts for almost 60% of the world’s official foreign exchange reserves while China’s share is just 2.25% at the end of 2020.
Meanwhile, stablecoins are on their way to surpass $100 million in market cap, with Tether dominating the stablecoin market with a market capitalization of $51 billion alone, managing over $20 billion in trading volume per day.
Earlier this week, the chairman of the Federal Reserve, Jerome Powell said that China’s digital yuan plans won’t make the United States rush for its own CBDC plans, adding China’s approach won’t work in the U.S.
“The currency that is being used in China is not one that would work here. It's one that really allows the government to see every payment for which it is used in real-time.”
The Federal Reserve is taking its own time to understand digital currencies, says Powell.