As the Chinese government battles over regulation of Bitcoin exchanges within their financial system, the People's Bank of China (PBOC) is currently developing their own sovereign crypto-currency that would begin to replace physical Yuan in a digitally based monetary system.
Using the same Blockchain technology that Bitcoin runs on, China's central bank is working towards a digital currency that could easily be tracked, regulated, and provide necessary liquidity to a nation that is moving more and more towards a cashless society.
China’s central bank is going digital.
After assembling a research team in 2014, the People’s Bank of China has done trial runs of its prototype cryptocurrency. That’s taking it a step closer to becoming one of the first major central banks to issue digital money that can be used for anything from buying noodles to purchasing a car.
Chinese people have embraced online payments for just about everything. To buy a can of Coke, thirsty commuters scan QR codes on their smartphones rather than feed coins into a vending machine. At Lunar New Year gatherings, money is exchanged via a few presses on a smartphone instead of crisp notes handed over in red envelopes.
All of that poses a challenge to the PBOC’s status as the central bank of both the digital and physical realms. So if you can’t beat them, join them.
For the PBOC, using blockchain, the technology that underpins the digital currency bitcoin, will allow it to trace transactions and collect "real-time, complete and authentic" data to compile precise monetary indicators such as money supply growth, OKCoin’s Duan said.
"The transparency of economic activities in every corner in the country will significantly improve," Duan said. "The central bank will have unprecedented knowledge of how the economy runs." - Bloomberg
Perhaps the biggest irony in all of this is that the emergence and popularity of Bitcoin has led sovereign governments and central banks to co-opt the technology, and take away the crypto-currencies biggest benefit of decentralized control. And in being able to create their own crypto-currencies on the Blockchain, it has given governments the impetus needed to eliminate cash from a monetary system, and eventually have total control over an individuals right to spend their money as they see fit.
Digital money in itself is not malevolent, as it provides a great convenience for individuals and consumers who do not want to carry around large amounts of cash to deal with their daily purchases. But at the heart of the current system is the knowledge that one can always take their money out of a bank in physical form if the institution collapsed into insolvency, or if central banks chose to impose negative interest on their money. And an eventual move to an all digital monetary system would cease having freedom over one's money forever.
Kenneth Schortgen Jr is a writer for The Daily Economist, Secretsofthefed.com, Roguemoney.net, and Viral Liberty, and hosts the popular youtube podcast on Mondays, Wednesdays and Fridays. Ken can also be heard Wednesday afternoons giving an weekly economic report on the Angel Clark radio show.