“What will happen to my freedom to build wealth, my secrets and safety?” one user asked on Chinese social media platforms in the apprehension of the digital currency.
China’s digital currency plans have far-reaching implications. The idea that began with Bitcoin’s and crypto’s rise five years ago is now shaping out to be a gigantic political move. Over these five years, China has filed over 50 patents related to blockchain technology and cryptocurrency.
Their blockchain-based currency is close to completion, but reportedly, anti-money laundering concerns are yet to be overcome.
Capital Control over Decentralization
The digital currency will enable the Chinese Government to establish absolute control over the monetary transactions in the country.
Keyu Jin, professor of economics at the London School of Economics, told the media,
“There’s a consensus around the world among central bank governors and governments at large that they want to have control of money and money supply and the seigniorage that comes along with it,” he added, “But over-obsessive control and governance is probably more unique to China than anything else.”
Hence, while cash or money will work seamlessly like physical pieces of paper money, this time, the Government will be able to surveil everything.
According to Mu Changchun, head of the Chinese central bank’s digital currency research institute, China will adopt a two prone approach: anonymous payments and “classified supervision.” He noted in his last address,
“Once we analyze these transactions, use big data and data mining technology and conduct identity comparisons, we will be able to find the culprits.”
Moreover, the Chinese Government is also likely to prohibit the exchange of Digital Yuan to other cryptocurrencies or stablecoins. For example, recently in August, Mu had noted that,
“Just imagine, if we acquiesce, that yuan can be converted into Libra, there will definitely be a massive currency exchange, triggering yuan depreciation.”
Will China go the extremes of banning crypto altogether?
Furthermore, digital wallets will be the new bank accounts for individuals. Hence, it would necessarily take control off of the banks on their lending powers. While commercial banks would still play an important role, the politics behind it would create additional barriers to entry.
The Chinese Digital currency plan threatens not only political control but also the future of cryptocurrencies in China.
Although China is promoting ‘blockchain,’ it could still go on and ban cryptocurrencies altogether to maintain capital control of PBoC. hence, killing the idea of decentralized money with it. Moreover, other nations might be motivated to release their digital versions as well.
Dovey Wan, however, expressed optimism for Bitcoin around these sentiments,
Chinese gov is always pro-Blockchain as a neutral database management tech
As for Bitcoin, IMO CCP will happily HODL it (as a new form of forex), and control retail fiat on-ramp to avoid capital flight
Their source of BTC? – many confiscated Bitcoin ponzi by the police
— Dovey 以德服人 Wan ? ? (@DoveyWan) November 1, 2019
Apart from the efficiency of transactions, a borderless network of payments is another aspect of cryptocurrencies. While it poses threats such as money laundering and terrorist financing, economic globalization has numerous benefits as well.
Do you think that countries are more likely to adopt decentralized currencies or follow China’s pursuit of capital control? Please share your views with us.