According to Richard Turrin, author of Cashless: China’s Digital Currency Revolution, China’s emerging digital yuan will challenge the dollar’s dominance in international trade settlements in the next decade.
“Remember that China is the largest trading country and you will see the digital yuan gradually replace the dollar when buying things in China,” Turrin said on CNBC’s Squawk Box Asia on Monday.
“If we move five to 10 years ahead, yes, the digital yuan could play a significant role in reducing the use of the dollar in international trade,” said Turrin, a former banker who also worked in fintech.
The push for alternative payment systems likely comes from countries wanting to reduce their current “mostly 100%” dependence on the dollar, he said.
“What you are going to see in the future is a pullback, a risk management exercise that aims to slowly and perhaps only marginally reduce dependence on the dollar from 100% to 80%, 85%,” he said.
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Beijing, however, is unlikely to use the digital yuan to help Moscow bypass sanctions imposed by the West, Turrin said.
“The digital yuan is a baby in the sense that it is in the testing phase, but has not yet been launched domestically and has not been tested on an international basis,” Turrin explained.
On a technical level, this means that it will be “extremely difficult” for China to use its CBDC to save Russia. He said Beijing also likely wants to keep its “newborn currency” out of the dirt on the political front.
“[China] wants to eventually have [the digital yuan] widely accepted, and turning him into a sanctions fighter now that he is still a child will not help achieve that goal,” Turrin said.