China will be the first major country to launch a blockchain-based national currency. The digital yuan "is expected to give China’s government vast new tools to monitor both its economy and its people. By design, the digital yuan will negate one of bitcoin’s major draws: anonymity for the user. Beijing is also positioning the digital yuan for international use and designing it to be untethered to the global financial system, where the U.S. dollar has been king since World War II. ... The dollar far outstrips all other currencies for use in international foreign-exchange trades, at 88% in the latest rankings from the Bank for International Settlements. The yuan was used in just 4%. ... Even limited international usage could soften the bite of U.S. sanctions, which increasingly are used against Chinese companies or individuals. Josh Lipsky, a former International Monetary Fund staffer now at the Atlantic Council think tank, said, 'Anything that threatens the dollar is a national-security issue. This threatens the dollar over the long term.' In tests in recent months, more than 100,000 people in China have downloaded a mobile-phone app from the central bank enabling them to spend small government handouts of digital cash with merchants, including Chinese outlets of Starbucks and McDonald’s. ... China has indicated the digital yuan will circulate alongside bills and coins for some time. Bankers and other analysts say Beijing aims to digitize all of its money eventually. Beijing hasn’t addressed that. ... The money itself is programmable. Beijing has tested expiration dates to encourage users to spend it quickly, for times when the economy needs a jump-start. ... What about volatility? Cryptocurrencies such as bitcoin are famous for that. But the People’s Bank of China will strictly control the digital yuan to ensure there aren’t valuation differences between it and the paper bills and coins. ... When bitcoin launched in 2009, most nations’ policy makers largely played down its significance. China paid attention. Always hypervigilant to threats, the leadership feared that a cryptocurrency could undermine government power if people began using it in earnest. ... The digital yuan could give those the U.S. seeks to penalize a way to exchange money without U.S. knowledge. Exchanges wouldn’t need to use SWIFT, the messaging network that is used in money transfers between commercial banks and that can be monitored by the U.S. government. ... More than 60 countries are at some stage of studying or developing a digital currency, according to research group CBDC Tracker. Digital currencies hold some of their biggest potential for the 1.7 billion people globally who the World Bank says lack a bank account. ... Asked during a recent Senate appearance whether the dollar could be digitized to help the U.S. defend its supremacy, the Fed’s Mr. [Jerome] Powell said researching that question is a 'very high-priority project.'"
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