In an interview conducted by CNBC, the CEO/founder of Bridgewater Associates, Ray Dalio, said that the digital yuan would be viable than the digital dollar.
Similarly, he expects the Chinese yuan to become a top reserve currency in the nearest future.
Ray Dalio, a billionaire investor and the world’s largest hedge fund, Bridgewater Associates, said that the digital yuan would be more competitive than the digital dollar.
In that interview, Dalio opined that he thinks the U.S. will issue a digital dollar one day. However, the digital dollar could be a “competitive” currency; it won’t be the most competitive one. Rather, its value could be impeded by growing U.S. debt levels.
According to the renowned CEO, the digital yuan will be more competitive in pricing and return. It will be “a very viable alternative” to many investors if it is accepted internationally and comes with attractive interest rates.
In Mr. Dalio’s words, “I think we’re going to enter a world in which people will be thinking which currency, and the ones that have the best fundamentals will be the ones that will be most competitive, and that’ll be threatening to countries,”
Mr. Dalio’s Projections
In addition, Mr. Dalio projected that China’s yuan would become a top reserve currency sooner than expected. Currently, China leads the whole world in terms of trade. By inference, it is the leading country in exports and imports. This forms a significant reason why Mr. Dalio expected increased trade and financial transactions to be denominated in yuan.
Also, he hopes to see the renminbi become a more important, strong, stable, more attractive-returning currency, and more widely used currency … in the coming years.
Currently, the dollar is the world’s largest reserve currency with a share of nearly 60%, according to data from the International Monetary Fund (IMF). Currently, China’s yuan has about 2%, behind the euro, Japanese yen, and British pound, per the IMF data. However, Dalio expects the yuan share to increase to around 10% to 15% in five to 10 years.
Mr. Dalio also opines that the increment will happen faster than most people expect, as a lot has to do with what China does and what the dollar does. China is nearing the launch of its digital yuan after over six years of research and development. On the other hand, the USA has only recently started exploring creating a digital version of its currency. The Federal Reserve plans to publish a discussion paper this summer on the potential issuance of a digital dollar.
Mr. Dalio concludes by saying that the digital yuan would compete with bitcoin, an “alternative currency.” However, the digital yuan will not completely take over the crypto market, as nothing ever completely takes over anything.