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In October, the digital currency that evolved from the DCEP project was officially launched at a conference in Shanghai. The digital renminbi has a series of remarkable features. It is backed up by the yuan and is designed as its own reserve currency. The payment service from central bank to the consumer is Blockchain-based. And the currency can be exchanged from smartphone to smartphone independent of settlement infrastructure and the Internet.

Features that will also please the trading partners of China, because it enables them to exchange goods with the second-biggest economy in a much more efficient way. Today, 152 nations are taking part in the belt and road initiative, representing some 40 percent of global GDP.

Host to a Full Range of Services

Switzerland in the past worked hard to become home to a so-called renminbi-hub and therefore the issue may also become a pressing one for its financial market. For instance, whether the hub could be extended to include the digital renminbi.

Furthermore, a transfer of technology may be on the cards: instead of investing heavily in a digital currency, countries involved in the DCEP may simply adopt the Chinese system. With its giant trading platforms such as Alibaba, the Chinese systems give participants access to numerous new business models.

The End of One Hegemony?

With the 5G standard, industry 4.0, artificial intelligence and its digital currency, China offers a plethora of extremely advanced solutions that may turn into hugely lucrative business models. There is likely to be no shortage of takers.

With the establishment of a digital Chinese currency that allows the development of progressive business models, the hegemony of the U.S. dollar may be about to come to an end. Time will tell whether the digital renminbi succeeds in replacing the Greenback as the global currency. But such a development is a strategic nightmare for the U.S. which already fights a hugely expensive trade war with China. The dollar, the weapon the U.S. uses to enforce sanctions across the globe, would lose a lot of its allure.

Headstart for China

It is exactly this concern that Mark Zuckerberg played on when he presented his Libra digital currency to U.S. lawmakers. He suggested that the U.S. may lose its hold over financial markets if it didn't succeed with keeping ahead of rivals in developing advanced solutions. But alas, Libra doesn't look as if it were to launch soon, with the U.S. and Europe showing little interest in handing their currencies over to a private entrepreneur.

Zuckerberg wasn't totally wrong of course. While most Western central banks at are working on their digital currency projects, China already is cementing its position ahead of the pack.