Big Brother Would Admire It: China and Its Digital Yuan

The digital currency used in China has passed the testing stage and is on the verge of a complete rollout to the entire country and area.

China is the second nation and first major economy to introduce a blockchain-based version of its currency. Now the Chinese government is producing currency digitally, in a new re-imagination of money that could pose a threat to the foundation of American influence.

Money can seem to be virtual already, as credit cards and payment apps such as Apple Pay in the United States and WeChat in China do away with the need for bills or coins. However, those are merely electronic methods of money transfer. China is converting its legal tender into computer code.

Cryptocurrencies like bitcoin have hinted at a possible digital future for currency, even though they operate outside of the conventional global financial system and are not legal tender like government-issued money.

Simply because a currency’s title contains the word “digital” does not mean it is a type of Bitcoin. That is not the case. It is just simply a government currency with a different distribution mechanism.

• China’s digital currency is regulated by the country’s central bank, which will issue the new electronic money.
• The digital Yuan does not have a market-based value that is separate from the old Yuan. They are entwined.
• There is no algorithmic protocol dictating the creation of new Yuan coins. The currency has a discretionary money supply under government control.
• The digital Yuan enables a novel method of population surveillance, generating new data that authorities can monitor.

By structure, the digital Yuan would eliminate one of Bitcoin’s primary benefits: consumer privacy.

“In order to protect our currency sovereignty and legal currency status, we have to plan ahead,” said Mu Changchun, who is shepherding the project at the People’s Bank of China.

Cryptographic protection gave the blockchain real value. This market-derived valuation offered an opportunity for miners to compete in block packaging.

No such thing exists in a state-issued digital asset,

The money itself can be programmed. Beijing has experimented with expiration dates to allow consumers to spend it quickly in periods when the economy needs a boost.

It’s also trackable, which adds another weapon to China’s extensive state surveillance. The government monitors its population with hundreds of millions of facial-recognition cameras, often used to impose fines for crimes such as jaywalking. When an infraction is observed, a digital currency may be used to both mete out and raise fines.

The claim that a digital currency issued by a central bank will lower transaction costs and be less error-prone is most likely correct. But at what cost? Even if your privacy rights are taken away? No, no, it shouldn’t be like this.

However, most governments, states, and regulatory agencies rushed to eliminate it. The problem is not decentralization or centralization, but government-centralization. For any political purpose, the nature of the digital Yuan compels one to achieve single power.

Essentially, this “digital money” lacks all that makes Bitcoin what it is. Bitcoin has shown that a government doesn’t have to exist for capital to exist. It requires no issuer authority or technocratic management.

Governments who attempt to construct their own cryptocurrency are merely trying to bask in the glow of one of our epoch’s greatest inventions while rejecting all that makes Bitcoin and other tokens so wonderful.

“There is no worse tyranny than to force a man to pay for what he does not want merely because you think it would be good for him.”

? Robert A. Heinlein, The Moon Is a Harsh Mistress