Chris Larsen, co-founder and chief executive officer of Ripple, wrote an article stating that the United States and China are already involved in a "technological cold war".
According to Larsen, China's dominance in cryptocurrencies and finance could be an important front in future battles between the two countries.
Larsen argued that the US dollar's hegemony over global financial systems could lose in the face of technological advances in cryptocurrencies and the use of digital wallets, blockchain technology and interoperability protocols.
This, he suggests, creates an opportunity for China to overtake traditional dollar-based financial systems through the use of mobile payments, including its digital currency electronic payment system (DCEP) – the state-controlled electronic yuan designed to help internationalize the currency.
"For China, this is a unique opportunity to take American leadership out of the global financial system, including its ultimate goal of replacing the dollar with a digital yuan," wrote Larsen.
As reported by Forkast.News, China's mobile payment systems have already become part of everyday life, with most citizens using Alipay and WeChat Pay, created by tech giants Alibaba and Tencent. Mobile payments reached 277.4 trillion yuan ($ 39.07 trillion) in 2018 – more than 28 times that of 2014.
Could China dominate the cryptocurrency market?
At least 65% of cryptocurrency mining occurs in China, according to the University of Cambridge's Center for Alternative Finance. According to Larsen, the loss of U.S. financial hegemony could also become a threat to cryptocurrencies, as China can take advantage of the accumulation of hash power within its jurisdiction to interfere in transactions.
"It is not difficult to imagine a dystopian future," wrote Larsen. “A payment from a US agency to an ally can be blocked or reversed. Payments by an American company to a Vietnamese manufacturer can be halted. American banks may have their payments restricted if they conflict with Chinese policy objectives. "
Digital Yuan x Digital Dollar
DCEP testing is underway in several cities in China, and analysts believe that its official launch could rival Sputnik's impact on US-China relations.
China's Belt and Road Initiative is another long-term strategy employed by China to strengthen its international economic influence, in essence, becoming a new “Silk Road” for participating countries. The Belt and Road could become an important channel for DCEP to replace the US dollar in international transactions and international finance if accepted by China's trading partners.
"Unfortunately, the United States is terribly behind," wrote Larsen. “I understand that the consequences of losing our financial leadership are dire. Domestic digital payments in the U.S. are still trying to catch up – cash and debit cards still dominate. "
The United States has not yet developed its own central bank digital currency, although Central Bank President Lael Brainard recently revealed that the Fed is working with researchers from the Massachusetts Institute of Technology to “build and test a hypothetical digital currency oriented to the use of the central bank ”.
"Given the important role of the dollar, it is essential that the Federal Reserve remains on the frontier of research and policy development related to CBDCs (central bank digital currencies)," Brainard said during a webcast.
Former CFTC chairman Christopher Giancarlo is leading efforts to promote a U.S. CBDC as head of the Digital Dollar Foundation.
In June, the Digital Dollar Foundation released an article explaining what a US CBDC might look like.
"The United States needs to get involved now, if we expect our values to be incorporated into future money," said Giancarlo in an interview with Forkast.News. "Now is the time to enter the debate about the future of money and ensure that those values, not just privacy, but the values of free enterprise, freedom of expression and democracy are incorporated into the future of money."
* Translated and republished with authorization from Decrypt.co