Dollar Trap and Digital Currency

Authors

Lan Cao, Chapman University, Fowler School of LawFollow

Abstract

The dollar’s status as the world’s reserve currency, cemented after World War II, has been called into question over the years. American stewardship of the dollar, as both a currency of the United States and an international reserve currency, has been a source of global resentment, from allies as well as rivals. Fractures within the international monetary system, many of which rise intrinsically from the dollar’s unique status, have been compounded by the manner the United States has used the dollar: one, to solve financial disturbances such as those emerging from the 2008 housing crisis, and two, to punish certain countries like Iran and Russia by cutting them off from access to dollars and access to the dollar-based international financial system. This Article examines how, against this backdrop, China’s establishment of a central bank digital bank currency, the digital yuan, is designed to serve both the Chinese government’s aim to consolidate Party control domestically as well as to engage in dedollarization or yuan internationalization, as a way to bypass American weaponization of the dollar.

Recommended Citation

Lan Cao, Dollar Trap and Digital Currency, 26 Chap. L. Rev. 503 (2023).
Available at: https://digitalcommons.chapman.edu/chapman-law-review/vol26/iss2/4