Recently, the Chinese government has announced that it will be issuing its own gold-backed cryptocurrency. This move may seem like a challenge to Bitcoin and Bitcoin Cash, but in reality it signals an intention to challenge the US dollar’s position as the global reserve currency. The implications are huge, but what does this mean for Bitcoin?
China’s Challenge To The US Dollar
The US dollar has been the world’s reserve currency since 1944, when it replaced the British pound. Over time, international trade came to rely more heavily on US dollars, which had little intrinsic value of their own. Instead of relying on gold or silver coins, trade relies on pieces of paper that can be printed at will by central banks.
These pieces of paper became more valuable than precious metals because people believed they could trust them with their money. But why should people trust these pieces of paper more than physical silver or gold? What are the advantages of China’s new yuan coin over Bitcoin?
It is possible for the Chinese government to make its own gold-backed digital currency without any interference from the United States government. The benefits are clear: China would have an easier time trading internationally and it would no longer need to rely on Western Union or other banks to convert its Yuan into foreign currencies.
The Advantage Of The Yuan Coin
It is important to note that the Chinese government isn’t planning on shutting down Bitcoin or Bitcoin Cash. They are looking for a way to compete with the US dollar as the world’s reserve currency, and they have chosen a more tangible form of money that can be backed by gold.
One of the advantages of China’s new Yuan coin over Bitcoin is that it will have a fixed supply, unlike Bitcoin. This will prevent inflation from occurring and cause prices on goods and services to increase over time which could lead to an economic collapse. In contrast, if demand for Bitcoin outpaces its supply, prices will decrease as mining rewards decrease.
In addition, China’s gold-backed cryptocurrency will not be available outside of China initially. This means that those located outside of China wouldn’t have access to China’s new yuan coin even if they wanted it. The value of this currency would only be dependent on how many people in China were interested in using it.
In a surprising move, China has unveiled a new gold-tinted yuan coin. The coin aims to challenge the global dominance of the US dollar and is already being touted as a potential threat to Bitcoin.
The yuan coin has been introduced as a way to hedge against the global dominance of the US dollar. China’s central bank governor, Zhou Xiaochuan, said that the new coin will “contribute to the internationalization of the Chinese currency.”
China’s yuan coin is not likely to be a threat to Bitcoin in the short-term. It has taken several years for China to even consider its own currency, and it will likely take much more time to develop before it can rival Bitcoin.
It’s only been about 15 years since the Chinese Yuan became convertible on the global market. And it will take decades to be able to compete with the US dollar.