Emergence of a new global currency – Opinion

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As the sun set on the British Empire, the United States used its economic might and arsenal to be crowned as the next superpower by replacing Britain. With the Second World War, the dream of becoming the superpower turned into reality sooner than expected, as many European countries, including Great Britain, financed their war efforts by borrowing money massively from the states. -United. Once the war was over, the United States was crowned as the undisputed global superpower and with that, the US dollar also became the preferred global currency replacing the British pound!

Over time, the US dollar has become more resilient and powerful. In recent times, the US dollar has been frequently used as an effective means to punish offenders and force them to abide by international laws in bilateral and multilateral disciplines.

In other words, within the framework of economic sanctions, the dollar has been weaponized and used against autocratic, dictatorial and rogue regimes to punish their acts of aggression, such as the forced and illegal occupation of territories of other sovereign nations, human rights violations, suspension of democratic institutions, detentions and prosecutions of political dissidents, silence on press freedom, closure of opposition media outlets, arrest of impartial journalist, religious leaders and minorities, etc

Petrodollar

Since OPEC’s inception, the US dollar has been the currency of choice for trading oil. However, as explained above, with its robust strength and hegemony of late, the United States frequently uses the dollar as the weapon of choice to impose economic sanctions against violators of the existing world order and its nemesis in freezing their US dollar. bank accounts and other assets. In the recent past, two major oil producers and founding members (Iran and Venezuela) of OPEC were subjected to economic sanctions, including not allowing them to have access to the SWIFT system and their bank accounts were frozen. . As a result, many countries are seriously considering how to balance the continued global reach and power of the US dollar.

In March this year, Saudi Arabia, the leader of OPEC, announced that it had decided to accept the Chinese currency Yuan for its oil trade.

This announcement stunned the OPEC community and oil importing countries. Also, he sent a message to the global community to support other currencies parallel to the US dollar for international trade and commerce. Additionally, and most importantly, it further strengthened the Chinese currency. Other countries that are part of the BRI (Belt & Road Initiative) are also planning to use the yuan to buy their energy needs not only from Saudi Arabia but also soon from other members of the GCC (Gulf Cooperation Council) . If this trend continues, the Chinese Yuan will soon become the preferred currency for oil and gas trading by the majority of countries (>145 BRI members) in the world and, as a result, the petro-dollar will lose its hegemony.

Numerical Yuan (d-Yuan)

The introduction of the digital yuan (d-Yuan) by China for trade initially between its own bloc of nations, in addition to its acceptance for oil and gas trade, will break the hegemony of the US dollar as the world’s reserved currency. . And if that happens, SWIFT will also lose its unique importance as the hub for processing global dollar-denominated transactions.

Currently, the yuan (fiat currency) is not traded openly beyond China’s borders and is also subject to restrictions by China’s central bank on how much yuan can leave the country. Moreover, even though it will be allowed to move freely beyond its borders, China’s central bank has to print huge numbers of yuan notes for settlements of international transactions outside of China.

The revival of the ancient Silk Road by China within the framework of the BRI and the offers of financial assistance to other countries (non-members of the BRI) and the emergence of China as a new superpower, the loss of the petro-dollar monopoly and the militarization of the US dollar, all accelerated efforts to find a new global currency. The continued escalation of the Russian-Ukrainian war and the relentless application of economic sanctions by the United States and its allies have given new impetus to the voices in favor of a new need for a global currency.

This backdrop has created the ideal conditions for China’s launch of the d-Yuan as the next global currency to break the long-standing hegemony of the US dollar in global capital, capital and investment markets that will operate alongside the American dollar.

The d-Yuan will be the dominant currency used in trade and commerce between member countries of the Chinese bloc. Thus, the recent introduction of d-Yuan and its current limited deployment in major Chinese cities using existing cashless transaction infrastructure paves the way for its wider use in global commerce. Additionally, the successful use by foreign athletes and visitors during the Winter Olympics has also cemented the d-Yuan as the most viable currency against the US dollar. Through its wide adoption domestically and internationally, d-Yuan will not only eliminate the need to print a massive amount of physical currency (notes), but will also eliminate the potential manipulation of Yuan by hostile currency traders, as is the case. was produced during the Asian currency crisis. at the end of the 90’s. Moreover, the deployment of d-Yuan will eliminate all kinds of restrictions for its cross-border transactions.

Banking awareness and corruption

Additionally, d-Yuan will also help rural communities where banks are not easily accessible by millions of its citizens or who do not have bank accounts and therefore do not benefit from the current currency-based banking system. Thanks to the d-Yuan bank, governments (local, provincial and central) will be able to help citizens more quickly and efficiently in the event of a disaster. Digital currency (d-Yuan) will also eliminate intermediaries and currency exchanges, giving more purchasing power directly to citizens. Loss of money when counting, confusion in knowing the face value of banknotes (especially by seniors) or theft by pickpockets will be a thing of the past.

Since every transaction will be recorded and transparent, d-Yuan will make money laundering, illicit financing and deep-rooted corruption of all kinds and at all levels of society and party virtually impossible.

How the d-Yuan and the d-dollar (US) will relate to each other and how its actual purchasing powers will be determined against other currencies in the global currency basket, only time will tell. will say.

Copyright Business Recorder, 2022

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