Newszy: The end of the global dominance of the US dollar (USD) has been predicted many times. The United States still represents the strongest economy in the world. But the second most populous country in the world – China – is breathing down its neck. If we take into account the Asian region as a whole, including Middle East, then neither the USA nor Europe are able to compete with this rapidly growing economic centre. Analysts of Gulf Brokers looked into alternatives to USD that emerge in the region.
As Asia’s economic power grows, especially thanks to China, India, but also Vietnam and Indonesia, questions naturally arise as to why countries in the region should not start using a currency that would help further develop mutual trade and economic growth, and that would be completely independent of the authority that influences its value from the outside.
The US dollar increasingly appears to be a currency that is not in line with the interests of Asia as such. In particular, it is not in line with the interests of China, with which the United States is effectively waging a trade war. Is it therefore possible that the US dollar will lose its position in Asia, if not in the global economy as a whole?
Although this is more or less a rhetorical question, there is a relatively simple answer to it: It is indeed possible. China, India, Vietnam and Indonesia do not generally need the US dollar to trade with each other and develop economic relations. However, for the smooth functioning of their mutual economic cooperation, a single currency would be suitable for them.
Should it be the Chinese yuan, the Indian rupee or perhaps the Indonesian rupiah? The purely economic answer would be that the participating countries will start using the currency they consider to be the highest quality or most reliable. In all likelihood, however, power influences will ultimately prevail, and so China will most likely promote its yuan, India its rupee.
With the global digitization of finances, however, it seems that the Asia’s monetary future lies somewhere else entirely. Why shouldn’t Asian countries start using one of the digital currencies? Which one should it be? Bitcoin? Ethereum? Or perhaps some other similar cryptocurrency? The aforementioned Asian countries will most likely want to use a currency that does not have the hallmark of a “Western” currency.
Therefore, an alternative is offered by a currency that will be issued by one of the central banks in digital form. Just as the Eurozone has been talking about launching a digital euro for several years, China has been preparing a digital yuan project in the form of a so-called CBDC for several years.
And at the end of September this year, a hub for the use of the digital yuan across national borders was launched in Shanghai. The People’s Bank of China (PBOC) announced the new hub, which will oversee three major platforms dedicated to cross-border payments, blockchain service networks, and digital asset management.
The initiative builds on commitments made by PBOC governor Pan Gongsheng in June, when he outlined eight measures to promote yuan internationalisation as part of a “multipolar” monetary system.
The launch has been hailed by experts as a pivotal move in China’s long-term strategy to enhance its influence in global finance. Tsinghua University professor Tian Xuan described the new centre as an important step towards offering a “Chinese solution” for cross-border payment infrastructure, providing alternatives to dollar-dominated systems.
China’s push to internationalise its currency has intensified in recent years, particularly amid trade tensions with the United States. Data shows the digital yuan has already surpassed the dollar in China’s cross-border transactions, with the country’s Cross-Border Interbank Payment System (CIPS) continuing to gain global traction.
Alongside the digital yuan, Chinese authorities are also exploring the use of yuan-backed stablecoins. Earlier this year, AnchorX launched the first stablecoin pegged to the offshore Chinese yuan, aimed at supporting Belt and Road Initiative markets. This two-pronged strategy combines domestic central bank digital currency (CBDC) development with offshore stablecoin pilots, broadening the yuan’s international use cases.
Despite maintaining strict bans on cryptocurrency trading and mining since 2021, China has selectively embraced state-controlled digital currency initiatives. The Shanghai operations centre underscores Beijing’s focus on financial sovereignty and controlled innovation in digital asset infrastructure.
The advent of the digital yuan could be very massive indeed. And just as the US dollar is still based on the power of the United States, the digital yuan could one day be based on the power of China. Then there would be virtually nothing standing in the way of the de-dollarization of Asia.
Syam KP
analyst of Gulfbrokers
Contact: support@gulfbrokers.com