US Treasury Secretary Scott Bessent has sounded the alarm over China's potential development of gold-backed digital assets, warning that such a move could undermine the dominance of the US dollar in the global financial system. The remarks came during a hearing before the Senate Banking Committee, reigniting concerns about a new front in the digital finance rivalry between the world's two largest economies.
Key Testimony: Bessent Reveals Rumors of China's Gold-Backed Digital Assets
Responding to a question about whether China might be building an alternative financial system based on digital assets, Bessent stated: "We don’t know that for sure. There are lots of rumors about Chinese digital assets, maybe backed by something other than the RMB, perhaps gold-based." He further noted that the Hong Kong Monetary Authority (HKMA) maintains a "very large sandbox" and has been actively traveling the world to explore new mechanisms for this purpose. "I would not be surprised," he concluded.
Bessent's testimony aligns with predictions from numerous analysts who have linked China's sustained gold purchases—along with those of other BRICS nations including Russia—to a preparatory phase for issuing a gold-backed currency. Such a currency would be designed to intermediate trade transactions without US involvement, potentially bypassing dollar-dominated payment systems.
Gold-Backed Digital Asset Context: BRICS Gold Accumulation
Alexej Jordanov, a content architect at Goldrepublic, argued that such a currency would "enable real-time settlements, reduce delays, and foster trust among participants. Such a system might even attract nations outside the bloc seeking alternatives to dollar-dominated networks."
Legendary economist Jim Rickards, who has extensively written about the power of currency in conflicts, stated back in 2023—when debate about a bloc-wide common currency was still active—that a gold-pegged currency would do wonders for the BRICS bloc. However, the bloc has since shifted to using national currencies for bilateral trade. In July, President Donald Trump threatened to impose significant tariffs on countries aligning with the "anti-American policies" of the BRICS group. Even before taking office, Trump had threatened BRICS countries with 100% tariffs if they ever created a common currency to rival the US dollar.
Trump Administration Stance: Close Monitoring and Tariff Threats
The Trump administration is closely scrutinizing China's developments in the digital asset space. Bessent's statements reinforce a heightened vigilance over potential alternative financial architectures. Analysts believe that a successful gold-backed digital currency from China would directly challenge the US dollar's role as the world's primary reserve currency and could reshape global trade dynamics.
At present, BRICS countries have focused on using their own national currencies for trade settlement rather than issuing a single common currency. Nevertheless, the accumulation of gold reserves and technological groundwork in the digital asset space continue to unsettle US policymakers. The Trump administration has made clear that it will take strong countermeasures against any actions that threaten to weaken the dollar's hegemony.