There’s a very interesting saying that almost every culture uses and that’s “Fighting fire with fire”. This phrase has not been more relevant than in the United States-China trade war that has been going on for a couple of months now.

It seems that the trade negotiations have been boiled down to assigning or taking away new tariffs in the hope of outlasting each others’ economy. However, in late 2019, the Chinese Communist Party took a new route to ensure its digital dominance over the world, thus facilitate its financial presence on the global markets. That is their digital currency, also known as the DCEP (Digital Currency Electronic Payment).

The currency is most likely going to be used to better control the transactions happening within the Chinese borders, but it will also be used for better international trade, investments and various other methods of gaining “soft power”.

In such an intense case of affairs, the only thing that other economies of the world can do is to either produce their own digital currency or agree on a joint one. But even if these countries start developing their own versions, it’s important to note that China already has a leg upon them.

Zuckerberg’s attempts selling Libra as a weapon against China:

Mark Zuckerberg, the CEO of Facebook, was trying to classify Libra, Facebook’s blockchain project, as a perfect alternative and answer to predicted Chinese financial dominance. However, that was not enough of a statement to convince congress in the dominance of the Chinese digital currency which is to come.

Despite these denials during the testimony, the Federal Reserve of the United States of America has started to look further into blockchain technology, simply as a countermeasure to China’s plans on focusing on it very seriously. The government agency is looking for a candidate to manage its retail payment division who will also research Decentralized Ledger Technology and the application of digital currencies.

The EU also starts talks about digital currencies:

The European Union has also concluded that even though Libra is not in conjunction with local regulatory standards, it does not mean that digital currencies are to be avoided or disregarded as a great asset for a position in global markets.

Many central bankers have noted the importance of a joint regulation of cryptocurrencies across the Union, and what better way to enforce it than the e-Euro.

The upcoming Brexit fallout also exposes the EU to a small market crash once it finally happens, thus making it vulnerable from any potential economic change in the East. Delayed operations and transactions on the regular Euro could potentially be overtaken by fast and cheap transactions of the CBDC, thus converting many institutional investors and global companies to the CBDC model.

A method China uses to gain influence:

One method that has surfaced over the years that China uses to gain influence in a region is lending more money to a specific country than they could possibly repay. This has been the case in most of the ASEAN countries, African countries and slowly developing in Central Asia and Eastern Europe.

The debt forces the government to sometimes either look away when a Chinese company has some kind of misconduct, or to simply allow the complete dominance of a specific local industry.

Introducing the DCEP into the mix will make the lending process even shorter, thus limiting other countries to intervene in future financing of various countries. To make it more specific, the Chinese blockchain system for its new digital currency could potentially allow billions of CNY to be transferred within just a couple of hours. The mining speed of Chinese farms is unmatched, and the regulations will be set by the government themselves, thus making it a completely effortless process.

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