Can China’s digital yuan reduce the dollar’s use in international trade?

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China’s nascent digital yuan is set to challenge the dollar’s domination of international trade settlements in the next decade, according to Richard Turrin, author of “Cashless: China’s Digital Currency Revolution.”

“Remember, China is the largest trading country and you’re going to see digital yuan slowly supplant the dollar when buying things from China,” Turrin told CNBC’s “Squawk Box Asia” on Monday.

“If we go about five to 10 years out, yes the digital yuan can play a significant role in reducing the dollar’s usage in international trade,” said Turrin, a former banker who has also worked in fintech.

The drive toward alternative payment systems is likely to come from a desire by nations to reduce their current, “mostly 100%” reliance on the dollar, he said.

“What you’re going to see in the future is a rollback, a risk management exercise that seeks to slowly and maybe just slightly reduce the dependence on dollar, from 100% down to 80%, 85%,” he said.

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Beijing, however, is unlikely to use the digital yuan to aid Moscow in bypassing the crippling sanctions imposed by the West, according to Turrin.

“The digital yuan is a baby in the sense that it is in trial but not yet launched domestically nor has it had any testing on an international basis,” Turrin explained.

On a technical level, this means it would be “extremely difficult” for China to use its CBDC to bail out Russia. He said Beijing also probably wants to shield its “new baby of a currency” from the mud on the political front.

“[China] wants eventually to have [the digital yuan] broadly accepted and making it a sanction-buster now when it’s still a baby, would not help in that goal,” Turrin said.

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