China “Hostile Takeover” Suddenly Spurring U.S. Dollar “Collapse”

China ‘Hostile Takeover’ Suddenly Spurring U.S. Dollar ‘Collapse’ Amid Bitcoin, Ethereum, XRP And Crypto Price Surge

Billy Bambrough
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I write about how bitcoin, crypto and blockchain can change the world.
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Nov 26, 2023,08:56am EST
China has rocketed into the lead of countries developing bitcoin and crypto-inspired digital currencies in recent years—amid fears U.S. dollar hegemony could be collapsing.

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The bitcoin price surge since 2017 and Meta’s failed Facebook digital currency project has propelled interest in so-called central bank digital currencies (CBDCs) (while nation-state bitcoin adoption could happen “sooner than you think”).

Now, as the U.S. dollar suddenly buckles under the weight of a swelling $33 trillion problem, fears have emerged dollar dominance is facing “a crypto-yuan hostile takeover” from China via Hong Kong.

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“It’s no surprise that the U.S. Treasury—whose remit includes combating threats to the dollar and protecting the integrity of the financial system—is warning Congress that dollar-based digital instruments, stablecoins, and crypto exchanges pose significant risks,” senior portfolio manager at Elliott Management, Jay Newman, and managing director at Morgan Stanley, Richard Carty, wrote in a Financial Times op-ed.

The pair pointed to a U.S. Treasury Department warning to the White House last year that bitcoin and crypto could pose significant financial risks that outweigh their benefits without an overhaul of regulations that have so far failed to find consensus in Congress.

While China cracked down hard on bitcoin, ethereum, XRPXRP 0.0% and other cryptocurrencies in 2021, it has stoked the crypto market in Hong Kong, creating a licensing regime for bitcoin, crypto and so-called stablecoins that are pegged to the U.S. dollar and expanding a trial of its digital yuan CBDC to the city.

The Federal Reserve and U.S. lawmakers have meanwhile demured on the creation of a digital dollar amid backlash from Republicans who fear state overreach.

“Unfortunately for the U.S. and its allies, as events currently unfolding in Hong Kong accelerate, CCP-controlled crypto stablecoins and related exchange transfer platforms will eviscerate … the [ability for the] U.S. and other Western governments to police bad actors by imposing economic sanctions on people they don’t much like,” Newman and Carty wrote.

The global stablecoin market has ballooned to a more than $100 billion market in just a few years while China’s digital yuan has rocketed to around $250 billion worth of transactions, the country’s central bank governor Yi Gang said in July, Reuters reported.

“It doesn’t look like much today, but the Hong Kong-based crypto dollar and dollar-based offshore transfer systems are like U.S. national debt: don’t matter until they do. As Hemingway might have put it, crypto adoption and facilitation driven by the CCP may well happen gradually, but, suddenly, it could become a new standard,” Newman and Carty wrote.

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Elsewhere, European Central Bank (ECB) president Christine Lagarde, which has led the ECB in trials of its own digital euro CBDC, has warned more must be done to control the flow of digital currencies such as bitcoin, ethereum and XRP.

“People are free to invest their money where they want, people are free to speculate as much as they want, (but) people should not be free to participate in criminally sanctioned trade and businesses,” Lagarde said during a student town hall event, adding she has a “very low opinion of cryptos.”

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Billy Bambrough
Billy Bambrough
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I am a journalist with significant experience covering technology, finance, economics, and business around the world. As the founding editor of… Read More