Russia sanctions could push other countries to develop their CBDCs
Yamaoka expressed his belief that China could create a currency bloc with the rise of its digital Yuan.
Cover art/illustration via CryptoSlate
Banking executive Hiromi Yamaoka believes that the conflict in Ukraine could influence central bank digital currencies (CBDCs) policy globally.
The former head of payments and settlements department at the Bank of Japan sees countries such as China exploring CBDCs to counter the dominance of US dollars.
China, others could explore CBDC to counter US Dollar dominance
Since Russia invaded Ukraine on its “special military operation,” world powers led by the US have imposed strict sanctions. Most of these sanctions have cut the country’s access to foreign exchange, making it impossible to make settlements in US dollars.
According to Yamaoka, sanctions using financial infrastructure should not be overused to maintain efficacy. He added that
The most effective, powerful weapon was the freezing of Russia’s foreign reserves.
Yamaoka continued that these sanctions have shown the effect of politics and national security on global financial infrastructure. Seeing just how much power western countries wield with this sanction, China may promote its digital yuan as an alternative currency for cross-border settlements.
Yamaoka said China could “create a currency bloc,” and from now on, “defense and national security will likely become key themes when debating CBDC.”
CBDC roles to become more pronounced
His statement echoes China’s intention when it created the digital yuan. One of the main goals of the digital currency was to help the Asian country increase transactions in the Chinese yuan rather than US dollars.
It was introduced to an international audience during the Winter Olympics and has already been used by over 260 million people in the country.
Other countries, including Russia, have also worked on a national digital project.
And with many of them witnessing how the western countries have weaponized the US dollars in a time like this, more powerful countries may now see the CBDC as an integral part of their financial freedom from the west.
The International Monetary Fund (IMF), in one of its previous reports, had stated that the Chinese Yuan had the potential of easing cross-border payments-especially if the country can reach an “understanding with foreign jurisdictions.”
US government is also exploring digital dollar
Seeing the level of success enjoyed by China with its CBDC project, the US government, through its recently signed executive order, has also shown a willingness to maintain the dominance of the US dollar in international transactions by working on a digital version.
According to available information, different federal agencies in the United States, alongside Congress lawmakers, have been studying how a CBDC project would affect the country’s economy and as a reserve currency of the world.
Get your daily recap of Bitcoin, DeFi, NFT and Web3 news from CryptoSlate
It’s free and you can unsubscribe anytime.