Kyle Bass, chief investment officer of Hayman Capital Management, says that the biggest threat to the West is the advent of the digital yuan, which he has described as a Trojan Horse that could undermine developed Western countries.
“I think China can force the adoption of their digital currency for trade and investment in China per se, unless the U.S. and the West outlaws it or basically disallows it,” Bass told CNBC during an interview Tuesday afternoon.
“And I believe the digital yuan is the largest threat to the West that we’ve faced in the last 30-40 years, and it’s because it allows China to actually get their claws into everyone in the West and allows them to potentially export their digital authoritarianism,” Bass said.
Of course, not everyone agrees with Bass.
China has said that the digital yuan isn’t an effort to displace the U.S. dollar
as the reserve currency of the world.
Last month, Chinese central bank deputy governor Li Bo said the country’s digital yuan
was aimed at domestic use.
“For the internationalization of the renminbi, we have said many times that it’s a natural process, and our goal is not to replace the U.S. dollar or other international currencies,” Li said on a panel at the Boao forum in mid-April.
Li has said that the digital yuan will expand to more Chinese cities after it was rolled out as a test in cities including Suzhou, Shenzhen, Chengdu and Xiong’an.
The case for China undermining the U.S. dollar has come in a number of forms this year.
PayPal co-founder Peter Thiel said that China is using bitcoin
as a financial weapon to supplant the dollar. Speaking at the Richard Nixon Foundation seminar in April, Thiel said China prefers to have two reserve currencies that counter the dollar.
“From China’s point of view, they don’t like the U.S. having this reserve currency because it gives the U.S. a lot of leverage over Iranian oil supplies and all sorts of things like that,” Thiel said.
China’s version of a digital currency is controlled by its central bank, which issues the new electronic money. The digitized currency is expected to give China’s government new tools to monitor both its economy and its people.
The digital yuan, presumably, also negates one of bitcoin’s major selling points: a decentralized platform that is broadly anonymous.
Officials in the U.S. have been broadly skeptical about bitcoin and crypto, but Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell have said creating a digital dollar is being explored.