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PBOC’s New Digital Currency Can Fuel Use Of The Yuan Globally

Reportedly, China’s planned digital currency can set off global use of the yuan, as per to the CEO of Circle, cryptocurrency financial services company. In the last month, the PBOC (People’s Bank of China) declared that it is close to release its own digital currency, stating that the foundation behind the shift is to “protect” its offshore sovereignty. Jeremy Allaire—CEO of Circle—said, “This becomes a system through which yuan can be used in daily transactions worldwide.” Seemingly, China’s central bank intends to launch its own digital token by a two-tier system, under which the PBOC and commercial lenders will be legitimate issuers.

Allaire said to CNBC, “I see this as a move fulfilling several goals. But, I feel the bigger opportunity here is a way for the Chinese yuan to be circulated globally. It is eventually a basis for the globalization of the yuan.” In the last few years, Beijing has pushed hard to attain more global entities to use the yuan outside China. On the other hand, the U.S. dollar is at the moment the world’s “strong or reserve currency,” as almost 58% of all the overseas exchange reserves globally are in U.S. dollars, as reported by the IMF (International Monetary Fund), and around 40% of the global debt is denominated in dollars.

On a similar note, earlier, China’s PBOC curbed reserve ratio for lenders as the economy stalled. China’s central bank announced that it was decreasing the number of funds that lenders have to hold in reserve in an attempt to further fuel its economy. In a statement, the PBOC stated that its reserve requirement ratio will be trimmed by around 50 basis points and it will further trim down that ratio by 100 basis points for several qualified banks.

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