By Renee Zhou

The stories of the US and China trade war have been centred on trading tariffs for the past 16 months. Instead of adding to the repetitive story, recently, this discussion on trade wars shifts the focus onto currency wars and the implication cryptocurrencies will have.

For decades, the US currency has been the world’s major reserve currency. With the economic growth of China, it is believed that China has attempted to dedollarize to reduce its exposure to US sanction in various ways. Dedollarize refers to using domestic currency instead of US dollars for countries other than the US. For example, the introduction of petroyuan in 2017, used Chinese-based currency for oil trading, so countries such as Russia, Venezuela and Iran could avoid pressures of the US currency.

Currently and looking to the future, the technology of blockchain will start the revolution of digital transactions or digital currency. What needs to be highlighted here is the difference between bitcoin and blockchain.

Going back to the concept, people tend to synonymize bitcoin and blockchain. However, they are effectively not the same thing. Bitcoin is a digital cryptocurrency, which was only one of the first to apply blockchain technology.

China’s president Xi Jinping at a Central Committee meeting on 24 October 2019 stated that “using blockchain as a breakthrough for independent innovation of core technology”. As a result, the price of bitcoin soared in the hours following Xi’s remarks.

Nevertheless, the currency war on cryptocurrency has gone beyond existing digital currencies such as bitcoin. Since regulators worldwide have huge incentives to rein in cryptocurrencies, what they want is the launch of their own digital currency. Accordingly, the use of non-regulated currency such as bitcoin would be heavily prescribed. As a matter of fact, the Shanghai headquarter of People’s Bank of China, the central bank of China, announced on 22 November 2019 that it will increase supervision and control to combat digital currency transactions. With the news being released, at around 20:15 AEST of the same day, Bitcoin started to plunge. In the following 24 hours, the decline reached 13%.

Regarding state owned digital currency, China plans to launch a framework called the Digital Currency Electronic Payment (DCEP). While the founder of Facebook, Mark Zuckerberg has also proposed to launch its own cryptocurrency, Libra, which will be pegged to the US dollar and will give the US congress additional insights.

In short, the trade war between US and China covers various perspectives, and there are more issues to the trade war beyond tariffs and the dominance of US dollar. Looking ahead, further phases of deals are expected to be reached to help with the global economic slowdown felt by many. Even without the trade war ending, at certain points, the global growth will still revive.

 Source: https://www.theguardian.com/business/2019/nov/11/chinese-digital-currency-facebook-librahttps://knowledge.wharton.upenn.edu/article/using-the-blockchain-a-strategic-roadmap-for-companies/https://edition.cnn.com/2019/10/24/perspectives/economic-slowdown-trade-war/index.html

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