CBDCs Could Address Interoperability Issues in Cross-Border Transactions
Huang, a Chinese academic, believes that central bank digital currencies (CBDCs) could play a significant role in cross-border transactions if interoperability challenges can be resolved. Huang emphasized the need to challenge the dominance of the SWIFT bank messaging system, which is controlled by the United States. To achieve this, he argued that Chinese allies should actively promote de-dollarization in key sectors like energy and commodities. Huang suggested the use of currency swaps and local currencies, including the yuan, for settlements with commodity-producing countries. This approach would gradually weaken the connection between oil and the US dollar. Huang’s ideas were shared on Twitter by Reuters China.
Hot Take: CBDCs and De-Dollarization in Cross-Border Transactions
The potential role of CBDCs in cross-border transactions is a topic of interest. Addressing interoperability challenges would be crucial for their effective implementation. Huang’s suggestion to break the dominance of the US-controlled SWIFT system aligns with the goal of promoting de-dollarization in key areas, such as energy and commodities. The use of currency swaps and local currencies, like the yuan, in settlements with commodity-producing nations could gradually reduce the influence of the US dollar. These ideas highlight the evolving landscape of global finance, with CBDCs and de-dollarization potentially reshaping cross-border transactions in the future.
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