The Wall Street Journal has put up an article explaining what China is doing with digital currency, and it is not paywalled via Twitter. Some bits:
A thousand years ago, when money meant coins, China invented paper
currency. Now the Chinese government is minting cash digitally, in a
re-imagination of money that could shake a pillar of American power.
It might seem money is already virtual, as credit cards and payment apps such as
Apple
Pay in the U.S. and WeChat in China eliminate the need for bills
or coins. But those are just ways to move money electronically. China is
turning legal tender itself into computer code.
Cryptocurrencies such as bitcoin have foreshadowed a potential
digital future for money, though they exist outside the traditional
global financial system and aren’t legal tender like cash issued by
governments.
China’s version of a digital currency is controlled
by its central bank, which will issue the new electronic money. It is
expected to give China’s government vast new tools to monitor both its
economy and its people. By design, the digital yuan will negate one of
bitcoin’s major draws: anonymity for the user.
Beijing is also positioning the digital yuan for international use and
designing it to be untethered to the global financial system, where the
U.S. dollar has been king since World War II. China is embracing
digitization in many forms, including money, in a bid to gain more
centralized control while getting a head start on technologies of the
future that it regards as up for grabs.
The dollar has faced challengers before—the euro, to name one—only to
grow more important when rivals’ shortcomings became apparent. The
dollar far outstrips all other currencies for use in international
foreign-exchange trades, at 88% in the latest rankings from the Bank for
International Settlements. The yuan was used in just 4%.
Digitization
wouldn’t by itself make the yuan a rival for the dollar in bank-to-bank
wire transfers, analysts and economists say. But in its new
incarnation, the yuan, also known as the renminbi, could gain traction
on the margins of the international financial system.
It
would provide options for people in poor countries to transfer money
internationally. Even limited international usage could soften the bite
of U.S. sanctions, which increasingly are used against Chinese companies
or individuals.
Josh Lipsky,
a former International Monetary Fund staffer now at the Atlantic
Council think tank, said, “Anything that threatens the dollar is a
national-security issue. This threatens the dollar over the long term.”
Also:
The money itself is programmable. Beijing has tested expiration dates
to encourage users to spend it quickly, for times when the economy
needs a jump-start.
It’s also trackable, adding another tool to China’s heavy state surveillance. The government deploys hundreds of millions of facial-recognition cameras
to monitor its population, sometimes using them to levy fines for
activities such as jaywalking. A digital currency would make it possible
to both mete out and collect fines as soon as an infraction was
detected.
A burst of cash-accumulation in China last year
indicates residents’ concern about the central bank’s eye on every
transaction.
Song Ke,
a finance professor at Renmin University in Beijing, told a
recent conference that China’s measure of yuan in circulation, or cash,
popped up 10% in 2020.
What about volatility? Cryptocurrencies
such as bitcoin are famous for that. But the People’s Bank of China will
strictly control the digital yuan to ensure there aren’t valuation
differences between it and the paper bills and coins.
That means it won’t make sense for investors and traders to speculate in the digital yuan as some do with cryptocurrencies.
So, I do seem to understand this right: Sinclair Davidson and the jolly band of RMIT blockchain swooners and conference attenders have been busy promoting a technology that libertarians fantasise reduces government reach into financial lives, but is actually more likely to increase it? Right.
It's about as funny as his inability to run a website that actually works properly in the comments section. Yay, free marketeers can do anything - except make their website run properly.