The US dollar has dominated the energy trades for decades. But a shift in the currency hierarchy is coming.
China and France settled their first LNG gas trade using the Chinese CBDC – the digital yuan, Reuters disclosed on March 29.
Shanghai Petroleum and Natural Gas Exchange, China’s energy trading exchange, reportedly facilitated the Yuan-based transactions, which encompassed 65,000 tonnes of LNG “ imported from the UAE.”
The Era of CBDCs is Here
The development of the digital yuan has been ongoing since 2014 and accelerated steadily in recent years.
People’s Bank of China has conducted a pilot program for its digital yuan in several provinces and cities across the country. Alternatively, the central bank has been reportedly working with major banks and payment providers to integrate the CBDC into their systems.
It’s noteworthy that China’s CBDC project is still in the pilot phase with no official launch date. With the first Yun-based gas trade, China achieved initial success in using the CBDC for international trade.
And no doubt the landmark event indicates that the country’s reliance on the US dollar is reduced.
China is undoubtedly leading the CBDC (Central Bank Digital Currency) race. The development of the CBDC strengthens its position as a global economic power. At the same time, people start questioning the fate of the US dollar.
Will it be the beginning of the end for the American dollar’s dominance?
The Last Days of USD?
The US dollar is under unrelenting pressure due to the recent banking crisis, rather than external forces.
Tracing back to March 13, the US dollar fell sharply after authorities’ intervention to stop the spreading contagion caused by the collapses of Silicon Valley Bank (SVB) and Signature Bank.
The situation was seemingly under control but still, the dollar holds its breath. President Biden said today that the bank crisis is “not over yet.”
Further explosions might not be a favorable situation for the dollar. But rumors have it that the banking turbulence could pave the way for the case of CBDCs.
The United States, while potentially trailing behind other countries in the development of a digital currency, will certainly not be absent from the surge of interest in CBDC.
Some authorities have indicated that the development of a digital dollar could significantly enhance the payments infrastructure in the country, as well as play a crucial role in the future of finance.
