Ever since bitcoin’s price set a new all-time high, people have been wondering what news would be spread to push the value down again. As was to be expected, China got a lot of attention. Apparently, the media only now discovered the country is working on its own digital currency to rival Bitcoin. The PBOC has been working on this project for some time now, as this is nothing “new” by any means.
China’s Digital Currency Will Fail
It is not hard to see why China’s plan to create a national digital currency will not succeed. The research began in 2014, yet there is still no white paper or information regarding the technology powering RMBcoin. While the PBoC has conducted trial runs of this new currency, very little practical information is known about it. No one knows how many coins there will be, how they will be stored, and how much control users will have over their funds.
On the last topic, the obvious answer would be “no more than you have with a bank account”. Central banks will never issue a currency that is not fully controlled by them. Do not expect the Chinese digital currency to grant consumers more privileges. Instead, it seems to take away even more of their power, as they will have little to no control of this digital money. In that regard, RMBcoin is very different from bitcoin and the two shouldn’t even be compared.
Online payments in China have exploded over the past few years. Scanning QR codes to make payments has almost become the new norm. Both of these factors attribute to the success of bitcoin in the country, even though it is scrutinized by the government. It is evident something will have to be done before bitcoin takes over the Chinese market altogether. Creating a central bank-issued digital currency seems almost like a desperate attempt, although it may find its place within Chinese culture.
For the PBoC, a digital currency they can fully control makes a lot of sense. The technology is available to introduce cost-cutting measures, as well as provide real-time data to monitor the financial ecosystem as a whole. The bank will know everything their customers do at any given time. On the other hand, it will also provide money supply growth insights and improve transparency. An interesting debacle, but one that is not “new news” by any stretch of the imagination.
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