Ray Dalio, a longtime bitcoin critic, is optimistic that the digital yuan will play a much more important role than the digital dollar
In an interview with the CNBC channel on Monday 31st May 2021, Dalio believes that the United States will issue its digital dollar one day and, “for sure, it will be viable”. But it will not be the most competitive digital currency, as its value is likely to be hit by rising levels of American debt, he added.
Yuan: the main reserve currency
Dalio also expects the Chinese Digital Yuan to become the main reserve currency sooner than expected.
Currently, China is the largest trading nation in the world, that is, it is the number one country in exports and imports. Dalio expects more negotiations and financial transactions to be denominated in yuan.
“I think you will see the renminbi become a more significant, stronger, stable currency, with attractive yields and more widely used in the coming years,” argued Dalio.
Currently, the Chinese yuan has a 2% stake, behind the euro, the Japanese yen, and the pound sterling, according to IMF data. However, Dalio expects the yuan’s share to increase between 10% and 15% over the next five or ten years.
“I think it will gradually happen faster than many people probably expect,” he said. “A lot of this has to do not just with what China does. It has to do with what the dollar does. ”
The United States, on the other hand, has only recently begun to explore the idea of creating a digital version of its currency. Federal Reserve, the country’s central bank, plans to publish a discussion article on the possible issuance of a digital dollar.
In the interview, Dalio also said that the digital yuan would compete with bitcoin, an “alternative currency”. However, the digital yuan will not completely dominate the crypto market, he said. “Nothing ever completely dominates anything.”