pull down to refresh

It is impossible to predict a decade out. These developments would be hard to predict maybe even two years out in normal times. We are not in normal times.
The reason the governments want a CBDC is because that gives them visibility into the accountholder's activities, and if they wanted to control those activities, a CBDC can give them that power. So if these governments are going to use a CBDC, it's going to be for a system that they control. Could a government CBDC be for a foreign currency? Sure, ... that's what El Salvador essentially has with the Chivo wallet -- a dollar-based wallet.
Why would a government in Africa add a yuan to their CBDC wallet? China, for many, is their largest or second-largest trading partner. Many (as shown in this post) have debt to China. So just like the IMF makes conditions for loans (especially for bailouts), then it would not be surprising to see China add conditions such as explicitly permitting use of China's CBDC in that country, or maybe adding a CNY token in that country's existing CBDC.
And then why would that CBDC actually get used? If you are a merchant and import your merchandise, you will need a foreign currency. If a CNY CBDC can be used cross-border, it can be used to pay for those goods -- even for imports from countries other than China (just like the dollar is currently oftentimes used to pay for imports from countries other than the U.S.). So the merchants would have an incentive to accept payment in the CNY CBDC and thus not have to convert local currency into CNY for those payments.
But that would pretty much put an end-date on a government's own currency. So don't expect that to happen without some crisis occurring first. Consider:
There is currently internal and cross-border conflict in a good number of countries in Africa. Add to that some predictions made that expect the energy crisis and famine to both become severe in a large number of countries of Africa. If that does happen, some nations will not still exist in their current form a few years from now. There could be further autonomous zones, or even countries that have seceded and become independent sovereigns. It would be those where a Yuan CBDC would likely be used first, alongside maybe USD stablecoins and bitcoin. Nobody knows. But that scenario is certainly not impossible to envision.
Thanks for the thorough reply. Having recently learned about the CFA Franc and how they used it to extract the natural resources from the region, I'm thinking that China will try the same playbook but with their digital currency. I really hope Bitcoin will be ready to help out over there before people are forced into bad money again.
Which countries do you think will come out of this instability best positioned for the coming century?
reply