Since the rise of consumer electronics, especially with smartphones in the past decade, financial technology has become a hot industry. As a result, online banking and digital invoices have become the norm.
One analyst, however, predicts that China will take this trend one massive step further, and will convert its entire fiat system to a digital ecosystem, which may be a cryptocurrency based on a private blockchain.
Chinese Renminbi To Go Digital?
In a recent appearance on Bloomberg TV, Don Tapscott, the co-founder and Executive Chairman of the Blockchain Research Institute in Canada, argued that the Chinese government and central bank could turn the Renminbi (RMB), also known as the Yuan, into a cryptocurrency with time.
Speaking in response to a question about decentralized crypto exchanges and mining in China, which local authorities are reportedly looking to crack down on, Tapscott, the co-author of all-encompassing blockchain primer “The Blockchain Revolution,” postulated that the reason why the government won’t ban the aforementioned industries is because in “20 years, we are not going to be using Bitcoin in China.”
Instead, he claims, locals will be using a cryptocurrency created by the central bank of China, as this would provide more control and efficiency for authorities.
Bitcoin-Hating Economist Wary Of Government-Backed Digital Assets
While Tapscott finds his argument logical, Agustin Carstens, the general manager at the Bank for International Settlements (BIS), has remarked that central banks and governments should not issue their own cryptocurrencies. Carstens, a staunch critic of decentralized cryptocurrencies who once called Bitcoin a “bubble, Ponzi scheme, and an environmental disaster” (in one breath no less), said last month that such initiatives may backfire.
As Bloomberg claimed, the skeptic suggested that what he called central bank-issued digital currencies (CBDCs) would change macroeconomic trends, like interest rates, shifts in central bank balance sheets, and market liquidity at large. Carstens explained:
“There are huge operational consequences for central banks in implementing monetary policy and implications for the stability of the financial system.”
But there may be a reason for China to go ahead with tokenizing/fully digitizing its national currency. As Hasu and Three Arrow Capital’s Su Zhu, who are both crypto industry researchers, explained in a blog post, PayPal, Venmo, and China’s WeChat by extension “remove every need for cash,” as they’re marketed as faster, cheaper, and more efficient forms of payment.
While this sounds all well and good in a convenience-seeking world, a nation where all transactions are digital will allow the government to comb through the ins and outs of every citizen’s life, giving them the ability to control and watch society with a Lord Sauron-esque eye. This will promote “surveillance, financial control, and authoritarianism.”
And as seen with China’s recent push to establish a “social credit” system, whereas each citizen is ranked based on how they live their lives and the data their devices output, a fully digital, government-backed currency seems to be begging to join that system.
Bitcoin: An Escape From Financial Surveillance
But there’s an answer to this existential crisis if the need ever arises: Bitcoin. The cryptocurrency, unlike its centralized counterparts, is not only non-inflationary, but it is also decentralized, non-sovereign, censorship-resistant, and private.
The last part there is, in the eyes of BitMEX chief executive Arthur Hayes, what makes Bitcoin especially valuable. Hayes once wrote that as privacy is an integral part of any well-function society, a system like Bitcoin will become more than essential in a society where cash is all but decimated.
Zhu and Hasu would agree, as the two wrote that while Bitcoin is viable as a digital store of value, it’s best used as a new breed of money — digital cash, “that combines the benefits of physical cash with the benefits of digital payments.”