Ray Dalio: Digital RMB will become a top reserve currency, Bitcoin is an "alternative currency"

Ray Dalio, founder of Bridgewater Funds, said in an interview with CNBC on Monday that the digital yuan will be more competitive than the digital dollar. He believes that the United States will one day issue a digital dollar, which may be a "viable" currency, but it will not be the most competitive and its value may be hit by the growing debt level of the United States. He also called Bitcoin an "alternative currency"

Dalio believes that the digital yuan will be more competitive in pricing and returns, and the yuan will become a major reserve currency faster than expected. If it is accepted internationally and has attractive interest rates, it will be "a very viable option" for many investors, he said: "I think we will get into a situation where people will think about which currency, the currency with the best fundamentals will be the most competitive currency and pose a threat to other countries..."

China is currently the world's largest trading nation, meaning it is the largest exporter and importer. Dalio expects more trade and more financial transactions to be denominated in yuan.

Dalio also expects China’s yuan to become a top reserve currency sooner than expected. “I think you’re going to see the yuan become a more important, stronger, more stable, higher-yielding currency and a more widely used currency over the next few years.”

Currently, the U.S. dollar is the world's largest reserve currency, with a share of nearly 60%, according to the International Monetary Fund (IMF). China's renminbi currently has a share of about 2%, lagging behind the euro, yen and pound, according to the IMF. But Dalio expects that in five to ten years, the renminbi's share will increase to around 10% to 15%.

"I think over time the renminbi is probably moving faster than most people expect," he said. "A lot of this has to do not just with what China is doing. It also has to do with how the dollar is doing."

China is about to launch its digital yuan after more than six years of research and development. The United States, on the other hand, has only recently begun to explore the possibility of creating a digital currency. The Federal Reserve plans to release a discussion paper on the possible issuance of a digital dollar this summer.

In the interview, Dalio also said that the digital yuan will compete with "alternative currencies" such as Bitcoin. But the digital yuan will not completely take over the cryptocurrency market, he said. "Nothing is going to completely take over anything else.