US Reps Highlight Likely Digital Dollar’s Edge Over Yuan
How a U.S. digital dollar could gain an edge over China’s yuan was the topic of discussion on Tuesday June 15 in the US House of Reps. Several experts were on hand to testify before the House Committee on Financial Services Task Force on Financial Technology regarding “Digitizing the Dollar: Investigating the Technological Infrastructure, Privacy, and Financial Inclusion Implications of Central Bank Digital Currencies.”
It was another example of China driving Congress’ agendas as the reps hold a second hearing in two weeks on a U.S. digital dollar. “China is in an early stage, as it’s become a very wealthy country over the last 30 years, of taking that wealth and using it strategically for both military and geopolitical purposes, and commercial purposes,” Rep. French Hill said in an interview. “They are moving rapidly in that to both conventionally challenge the dollar and through digital means. This is a long-term challenge, but the time to talk about this and develop our strategies is now.”
The edge that the U.S. has in financial services, its free democracy backed by rule of law and an established court system, and its superior privacy protections are some of the characteristics that are expected to give a digital dollar an edge over the digital yuan globally. The testimony in the U.S. coincides with the news that China’s digital yuan recorded its first use as a form of salary payment. From its use for online and in-store purchases to being presented in a card form, it is the first time the blockchain-digital yuan model is used for salary payments purposes in China.
A local media report says the Xiong’an branch of the Bank of China and China Xiong’an Group Digital City Tech recently made an on-chain issuance of digital yuan to forestry employees for work remuneration. During the meeting, Dr. Jenny Gesley, a Foreign Law Specialist at the Law Library of Congress, gave an overview of different design choices available for central bank digital currencies (CBDCs), reasons in favor of and against adopting a CBDC, and some legal, economic, and technical considerations.
For Jonathan Dharmapalan, the founder and CEO of eCurrency, the US has the opportunity to set the rules for how digital currencies function in the international financial system while the U.S. dollar remains the global standard in financial instruments. “We understand how China plans to use its CBDC to surveil users and to attempt to sidestep the US dollar’s position as the world reserve currency,” he says. “The US can develop its CBDC to be a model for upholding privacy, promoting inclusion, and increasing innovation.”
Rohan Grey, Vice-Chair (Privacy) Digital Currency Global Initiative, who says he disagrees with the claim that designing a digital dollar system to allow for anonymous peer-to-peer transactions would be “radical” or “extreme,” also testified before the representatives. In a transcript of his oral remarks, Grey argues that preserving the right to make peer-to-peer payments without third-party approval reflects an approach that ensures freedoms in the future as were in the past, calling for “privacy in public” regarding digital transactions.
“If the digital dollar is to stand for more than surveillance, data-mining and political censorship, like China’s digital Yuan or Facebook’s Diem, American policymakers must be willing to articulate and defend a different set of principles and commitments, even when it entails difficult choices,” Grey said. He added that the way to limit the risk of data abuses is to not collect unnecessary data in the first place.