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Divergent paths in digital currency development: a comparative study of China and the United States with a global perspective

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  • Xie, Danyang

Abstract

The United States and China exhibit markedly different development paths in digital assets and blockchain technology. The US relies on market-driven approaches, with the private sector promoting stablecoin innovation to strengthen the dollar’s global position, while China adopts a government-led approach, implementing centralized systems such as consortium chains and the digital yuan (e-CNY), emphasizing financial security and regulation. These divergent paths reflect fundamental institutional differences: American distrust of centralized institutions has fostered distributed ledger development, while China mitigates risks through government leadership. Currently, the digital yuan faces adoption challenges due to insufficient enthusiasm from commercial banks. We propose implementing a “dynamic reserve mechanism” to incentivize circulation and enhance privacy protection to address user concerns. The private sector should participate more actively in innovation, and we recommend establishing AI-supported “dynamic regulatory sandboxes” or “smart regulatory gateways” based on smart contracts to better balance innovation and regulatory needs. To address inflation and depegging risks of stablecoins, we recommend moving beyond fiat currency pegging to explore new models anchored to consumer goods, such as a “BigMac Coin.”

Suggested Citation

  • Xie, Danyang, 2025. "Divergent paths in digital currency development: a comparative study of China and the United States with a global perspective," MPRA Paper 124989, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:124989
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    References listed on IDEAS

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    1. Allen, Franklin & Gu, Xian & Jagtiani, Julapa, 2022. "Fintech, Cryptocurrencies, and CBDC: Financial Structural Transformation in China," Journal of International Money and Finance, Elsevier, vol. 124(C).
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    4. Jonathan Chiu & Seyed Mohammadreza Davoodalhosseini & Janet Jiang & Yu Zhu, 2023. "Bank Market Power and Central Bank Digital Currency: Theory and Quantitative Assessment," Journal of Political Economy, University of Chicago Press, vol. 131(5), pages 1213-1248.
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    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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