Will Sanctions Against Russia Boost China’s e-Yuan?

Will Sanctions Against Russia Boost China’s e-yuan?
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Nothing can be predicted at wartime. While some parts of the world struggle with humanitarian crises, other relatively wealthy and privileged parts are busy making political agendas out of the situation. A little over a week ago, Russian forces invaded Ukraine over a dispute of the latter joining NATO, i.e., North Atlantic Treaty Organization. Russia also wants control over the borders of Ukraine to monetize on its dominance over energy supply. With this, many other big and powerful countries like the United States, United Kingdom, European Union have come into the picture to limit Russia. One of the ways they did this was by imposing financial restrictions on Russia to curb its money flow.

Russia had it when it was removed from Swift– an international messaging system facilitating international fund transfer. As no traditional banking options were now available to Russia, it was suspected by many analysts that Putin would take the road of cryptos. Lately, the suspicions have been confirmed to some extent. But wait, there is more left to consider over here. According to many experts, this opportunity can also lead to the extensive breaking of China’s own digital Yuan. 

Also Read: Ukraine Government Issues War Bonds To Raise $270 Million To Fund Its Fight Against Russian Invasion

China has a Cross-border Interbank Payment System, popularly known by its abbreviation – CIPS. This particular system can facilitate international transactions, thus providing a way for Russia to escape the financial sanctions imposed upon it by the US. But how does the e-yuan help in this context? CITIC Securities is a Chinese investment bank headquartered in Shenzhen, China. An analyst with this bank, Ming, sheds some light on the role of e-yuan by stating, “One distinctive characteristic of digital Yuan is that payment and settlement happen concurrently. This will help reduce reliance on bank accounts and bypass financial intermediaries in some scenarios.” As we know as much from cryptos already, such transactions that happen on blockchain technology are difficult to limit or restrict in anyways, and Ming Ming’s mention of concurrent transactions implies the very same. 

Setting historic records, China’s Yuan surpassed the US Dollar this Tuesday by reaching a high of 6.3014. With this, the hope and aspirations of the nation lie within the Chinese e-yuan, and the Russia-Ukraine war gives it a conducive timing. 

BUT! China has yet another thing to consider. Though China is the second-largest economy globally, the aspect of monetary transactions, exports, and reserves cannot be ignored. Considering that it goes against the interest of America and Europe, should China allow Russia to use CIPS, it may anticipate sanctions from these two countries. As this might prove disastrous for China’s economic stability, many industry experts point out that this might be what is holding China back from going all the way to help Russia. 

Also Read: Apple, Ford, And Other Major American Brands Are Pulling Out Of Russia Over The Invasion Of Ukraine

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