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Who is the biggest treats for the American Doller? What is E-CNY?

So you are the head of one of the world's largest countries. Your country has sophisticated payment infrastructure. World's most pervasive surveillance system and possibly the most advanced AI tech. But there are three major threats to your power. To eliminate any potential threats to your dominance, you need to make a move and it should be fast. Here's how China solved this problem? 

These two(Tencent and Alibaba)  private companies account for 90% of digital payments in China. This means that these companies are in a position to access the data of more than a billion people. Needless to list the unmatched benefits they get from exploiting this data, the government realized that so much power in the hands of private players could challenge its authority. But this wasn't the only threat. Known for surveillance and tracking, every move of its citizens, it would have been ironic if China did not ban cryptocurrencies. China has very strict laws against the purchase of foreign assets. Cryptos decentralized nature helped Chinese citizens to circumvent capital controls and acquire foreign assets without coming under the radar of Chinese authorities between the year 2019 and 2020, more than $50 billion worth of cryptocurrency left the East Asian accounts, most of which was Chinese capital in the form of crypto. Chinese authorities didn't like the fact that money was flowing out of their country and eventually they banned cryptocurrency.

What makes U.S. sanctions a very effective economic weapon is the fact that nearly 90% of international transactions is conducted through the US dollar compared with the Chinese yuan, which makes up only 2% of global payments and reserves. And since U.S. dollar is subject to U.S. law. Thus if the US government does not like the conduct of a country, it can simply impose sanctions on it, crippling its ability to trade internationally. Swift also plays a very important role in sanctions. It is a vast messaging network used by banks and other financial institutions to send and receive information regarding money transfer. 1014 they spent six years researching the project and in 2020 the pilot programs were launched in these cities. The program was a success and from there it grew rapidly. Here's how it works. You download the app, link your card and transfer money to your digital wallet. However, unlike online payment services, you are not just adding money to your wallet, you are essentially converting traditional yuan to a digitized version of Yuan which essentially have the same value. 

However, digital Yuan is also not a cryptocurrency as unlike Bitcoin or other cryptocurrencies, digital yuan does not operate through a blockchain based decentralized Ledger. Rather, it is a centralized operation that is supervised by Chinese authorities. It means that Chinese authorities have complete access to where, when, and how you are spending your money. Combine it with the country's pervasive surveillance and social credit system you have. The power to monitor every single move of more than a billion people in the past. The Chinese government had to go to payment platforms to get the data, but with the digital yuan they don't need to take that extra step, which translates to less dependency on private corporations. More than 261 million individual users have created E CNY wallets so far and $13.8 billion worth of transactions have been made using the digital Fiat currency.

Now comes the international implications. Most of the problems with any international transfer of funds arise due to the large number of intermediaries involved in the process. Intermediaries can take a huge cut from the total amount being sent, and when there are frequent and large transactions, the numbers start to add up. Digital Yuan has next to no intermediaries, making it faster and cheaper to move money across countries. China's position as the world's largest exporter also gives it an edge over the US dollar.

If you want to import something from China, your currency is exchanged with USD. When the money reaches the exporter in China, it is then again converted from USD to yuan. Due to the intermediaries and the currency exchanges involved in the process. This turns out to be a very expensive proposition for both the parties involved. To combat this problem, China can offer its trading partners direct transactions denominated.

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