The independence of money from government control is a core ideology for many in the cryptocurrency community. Satoshi Nakamoto, the alias used by the founder of the Bitcoin idea, believed that central banks exploited people put in them by their trust. “The central bank must trust not to undermine its currency, but the past of fiat currencies is full of breakdowns,” he said when his peer-to-peer currencies were first revealed. “Banks must be trusted to maintain and electronically move our money, but lend it in waves of credit bubbles with only a fraction of it in reserve. We must place faith in them in our privacy and trust them not to allow ID theft to drain our accounts. “Hence, crypto enthusiasts are naturally worried about the plans of China to create a digital currency, not independent of the State, like Bitcoin, but controlled by it. Digital yuan is expected to launch in 2020 and is the world’s first central bank-controlled digital currency. As a digital version of China’s currency, the Government hopes that foreign transactions will become more accessible, money laundering will be minimized, and digital currencies, such as the proposed Facebook Libra will compete against.
Upon China entering the global economy in recent decades, the West expected the export and import flow to bring not only economic liberalism but also political freedom. That’s not the case— after Xi Jinping slowly tightened up the reins of power in 2012. The Great Firewall censors several international pages and political dissent in a network of legislative and technological frameworks while the Great Cannon device is used to overwhelm and uninstall every government website it considers aggressive. And artificial intelligence and technology for the identification of the face are coupled with public CCTV systems to track people in what has become known as systemic racism, including the persecution of Uighur Muslims in Xinjiang province.
For those who don’t want to log and compile their location and identification along with other personal information, paper cash is an important tool.
James Griffiths, the author of China’s Great Firewall, argues that technology in China has not empowered citizens, as it has in the West–with certain exceptions–but instead reinforced state authority. The government’s willing acceptance and investment in certain innovations have helped make China a world leader in many ways, but have also made its people more active in a framework in which both private companies and state security have been controlled and monitored extensively,’ Griffiths writes.
Therefore, paper cash remains an important resource for those in China who are not interested in tracking and aggregating their position, spending habits and identification alongside other personal information. Contrary to digital coins that leave a time-stamped transaction record, paper notes and coins do not have such metadata and can not be tracked to a person. Alex Gadstein, head of the Human Rights Foundation Strategy Officer, describes cash as a’ last refuge of privacy’ in China.
Whether the digital yuan known as Digital Currency Electronic Payment (DCEP) will be based on blockchain or alternative digital leader technology, including bitcoin, is not yet clear. It won’t be open or decentralized. “We know the public demands that we remain anonymous with paper money and coins… that we send those people who want it anonymously in their transactions,” Mu Changchun, head of the Institute for Research in Digital Currency, People’s Bank of China, said in November at a conference held in Singapore. Simultaneously, we are going to balance’ controllable privacy’ and anti-money-laundering, CTF and also tax issues, online gambling, and all electronic criminal activities.’ In Gladstein’s opinion, DCEP is likely to be sold to the public using a seductive narrative of’ convenience and modernity.’ Cashless payments are more omnipresent in China than in any other region. The eMarketer research firm estimates that half the country’s residents use smartphones to pay for everything from vegetables on local markets to bus tickets. Today the majority of mobile payments in China use two private services, AliPay and WeChat Pay, which will eventually be replaced by government-backed digital currency.
Gladstein said it will directly control the money supply in Peking and allow direct monitoring in real-time. It also provides the government with a view on financial transactions that are the most sensitive form of personal data.
While many people in the West are much more concerned about the use of their data by private companies, the Chinese government faces far fewer constraints on privacy and data protection. The government is creating a comprehensive “social credit” scheme, which the government is planning to introduce this year, focused on oversight and personal data collection. There are already pilot programs in place that reward good actors and punish bad actors. In the Rongcheng region of China, a system will subtract littering points for residents and encourage them to regain them with tough work. A similar scheme in Shanghai encourages the proper handling of waste. The digital yuan, says Gladstein, should work together to regulate cultural, social and moral behavior.
Beyond China, digital yuans could also support the government’s long-term plan, through near-colonial ventures in the developing world, to raise its global standing. In Pakistan, Myanmar, and Zimbabwe, Beijing is already funding major infrastructure projects which typically involve building bridges, housing, and then the telecom networks that will have digital yuan integrated.
It would not only be a method to introduce a yuan globally but could also pave the way for the international currency standard to dethrone the dollar. Bank of England Governor Mark Carney told Wyoming Economic Politics Symposium last August that the US dollar could be replaced with a central bank-backed digital currency — from China or any other global power.
The digital yuan could sell a nuclear warhead to North Korea and eventually point to the US.
Other observers expect a worse outcome by using digital yuan to broaden monitoring and control to the West. The first move, as economist Takahide Kiuchi put it, is that as part of its Belt and Road initiative, China “use the yuan more broadly in dealings with partner countries,” an ambitious international infrastructure program. Gladstein says that this could ultimately lead countries to be forced to repay digital yuan loans so that Beijing can interrupt or spy on communication.
In the meantime, Europe and the United States seem to have only recently become aware of the consequences of the Chinese digital currency. Christine Lagarde recognized, in her first speech as President of the European Central Bank (ECB) in November, that the West has fallen’ behind the curve’ on digital currencies and announced that an EU-wide task force is looking to address this problem. At the same time, regulators, including the ECB, have quashed Facebook’s Libra, which many regarded as the most viable competitive player in the digital yuan, as regards fears that it might threaten the stability of government currencies.
In defending Libra, Facebook’s Mark Zuckerberg specifically cited the threat from China, saying in October that the digital currency will “extend America’s international financial leadership, democratic values, and regulation,” and “China is moving rapidly with the launch of a similar idea over the next few months.” The group showed the digital yuan could potentially allow North Korea to sell a nuclear warhead by allowing western opponents to bypass the dollar called SWIFT international banking system and avoid economic sanctions.
Ash Carter, the founder of the Belfer Center, played the role of Defense Secretary — also in his real-life role during the tenure of President Obama. “This currency problem is not a way to allow the Chinese to stand up for what was historically our might,” he said, pointing out China’s growing influence over Asia and Africa. “We must somehow fight it.”
‘ Definitely ‘ China Digital Currency Release in 6-12 months.
Talking to CNBC on 20 November, Edith Cheung, a partner of the venture capital firm Proof of Capital, seemed confident about the imminent arrival of the digital currency.
“I certainly think in the next six to twelve months,” she told the network about the time frame for launch.
China has been creating virtual yuan for several years, but senior officials of the government have so far refused to say when it might become a reality.
Nonetheless, for Cheung, foreign powers should be prepared to respond, as China aims to be the first country in the world to make its national currency a digital incarnation.
“I truly believe that the United States will hasten; to have clear thinking and strategy, at least a virtual USD guidance,” she said.
Another investor earlier this month issued a more optimistic digital currency roll-out prediction that they would emerge in just three months.