No products in the cart.
- Latest
- Trending
ADVERTISEMENT
China is at the forefront of a state-backed cryptocurrency known as CBDC (Central Bank Digital Currency).
Innovation is to be celebrated, but there are some very ominous concerns here. And it feels like they are getting closer.
China’s central bank governor, Egan, spoke at Hong Kong Fintech Week about how advanced the national digital currency has been recently. Despite his claim that privacy protection is one of the top things on the agenda for him, the reality is that this gives the Chinese state unprecedented power over its citizens. .
As you can see, the national currency means you can freeze your wallet (the equivalent of a bank account) with a single button press. Worse, they can drain. The impact here is endless.
Governments could, for example, introduce automatic tax regimes that deplete funds each year. Or maybe some kind of good system. A social credit system, a developing national credit rating and blacklist, could also be integrated with the national currency. Is it insane to think that a credit system that tracks the trustworthiness of individuals and businesses introduces monetary punishments and rewards?
I wrote about many of my concerns when I focused on the Sand Dollar in the Bahamas in April of this year. While concerns remain, the Chinese state’s track record of dominance and the size of its economy means that China is on another level and a dystopian future is much easier to imagine.
Concerns aside, it’s fascinating to read about how they work if not terrifying.
His claim that anonymity is protected centers around a two-tier payment system. In the first stage, the central bank will provide renminbi to the operators and only process inter-agency information. In the second tier, operators (who are all empowered) collect only the personal information necessary for the exchange and circulation of currency to individual citizens.
Yi went further and promised that dates would be encrypted and that personal sensitive information would not be shared with third parties. More notably, transactions are allowed to occur under complete anonymity up to a certain level.
This definitely looks promising. But again, the evidence and history here are not on the side of the Chinese state. In delving further into Yi’s quotes, he cautioned that this anonymity should be taken into account.
We recognize that anonymity and transparency are not black and white and there are many nuances that need to be considered carefully. I have to take it.”
That balance is sometimes a difficult line in cryptocurrencies. I recently wrote about the dangers of decentralization, but in this case the dangers of centralization are greater.
For many, CBDC is incredibly dystopian. Obviously, assuming you’ve read this article before, you fully understand how this applies.
Again, CBDC and blockchain technology have their perks. Efficiency, low cost, high speed, and accessibility are all strong proponents. But the danger is very severe. I guess we’ll have to wait and see what happens, but for now it looks like China is leading the way, but I don’t know if that’s a good thing.
