Digital Dollar Strategy Paper Krach Touw (Public Version)
Digital Dollar Strategy
Rise of China Payment Networks and Digital Currencies. China’s emerging payment networks, together with its new digital currency, pose a greater long-term threat to U.S. national security interests globally than 5G, AI, or semiconductors, combined. If the United States acts now, it can counter China’s expansionary efforts to control emerging market money flows, and ultimately, global monetary flows.
Policy and strategy recommendations are provided. In 2020, China also launched the world’s first Central Bank Digital Currency (CBDC) based on the renminbi (a “digital yuan”). China began research on its digital yuan in 2014.9 Although this effort is targeted at the M010 money supply, given its digital nature, it can eventually grow into M111 money supplies. Both Alipay and TenPay will support China’s digital yuan, making the renminbi the primary currency underpinning these Chinese-controlled payment networks.12 A digital yuan by itself would likely be confined to China, but together on growing payment networks outside of China, is a far greater threat to the U.S. dollar as the reserve currency.
U.S. policy and strategy recommendations:
1) Consider placing Tencent (TenPay and WeChat Pay) and Ant Group (Alipay) on the Entities List, requiring a license for any current or future U.S. technologies, particularly before Ant Group’s impending IPO,
2) BlockdownloadsofAlipayandWeChatPayintheUnitedStates(after careful interagency deliberations). The highly personal information that is required to be stored in Alipay and TenPay (WeChat Pay), makes TikTok look like child’s play
3)TheUnitedStatesshouldleadaconsortiumoftechnologypartnerstofasttrack the development of a better, more compelling alternative digital currency and payment network platform for developing economy central banks.