Op-Ed: China pioneers a national digital currency. Can the U.S. catch up?

By ADITI KUMARMAY

While much of the world is consumed by the COVID-19 crisis, the Chinese government is quietly unleashing a financial innovation that will reshape its economy and improve its strategic standing for decades to come. In April, China’s central bank introduced the “digital yuan” in a pilot program across four cities, becoming the world’s first major economy to issue a national digital currency.

The contrast this past month between Beijing and Washington is telling. While Chinese leaders achieved an important milestone in modernizing their payments system, the Trump administration was focused on including the president’s name on paper stimulus checks.

The digital yuan will eventually replace cash in circulation, likely interfacing with popular payments platforms such as AliPay and WeChat Pay and the existing banking system. In an economy in which more than half a billion people already use mobile payments, the transition to a national digital currency should be seamless. But there’s a critical difference: Unlike privately issued forms of digital cash in wide use today, like mobile payments and credit cards, the digital yuan is the liability of the state, like cash.

The move from paper to bytes is more than just a sign of our digital times. Chinese leaders are making a strategic choice to achieve both a vastly more efficient administrative state, and the ability to dictate the terms of 21st century economic diplomacy by setting the standard for digital monetary systems…..more

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