In the beginning, digital assets were created to transcend geopolitical issues. Bitcoin and other digital currencies were and continue to be outside the influences of central bankers and their machinations. BTC has commonly been referred to as the first global currency (there may be some gold bugs out there that would dispute this moniker). But as this Bloomberg article points out, some of the largest economies in the world are beginning to see the advantages of a digital currency. China’s push to a digital yuan has several implications not only for the dollar but for the digital universe as a whole.
China’s foray into the digital world has been characterized as an attempt to unseat the dollar as the global reserve currency. This has certainly been noticed here in the States with proponents of a digital dollar pointing to the need for a crypto-dollar to counter a serious national security issue imposed by a potentially dominant Yuan-backed digital currency. Most notably, the champions of a digital dollar are US Congressman Bill Foster and former CFTC Chairman Chris Giancarlo. Most certainly any moves made in Beijing towards unseating the dollar will need to be met by the US Government and West.
China’s digital yuan is not a decentralized currency, so it differs from BTC and other similar cryptocurrencies like ETH, BSV, etc. The Chinese government can (and most definitely will) monitor its use and control its supply. To that end it does not solve some of the problems true decentralized assets do, like supply and privacy. However, any efforts made by central authorities will certainly build the infrastructure for the population to use digital assets, greatly increasing the ease of use of de-centralized cryptocurrencies and the likelihood of ultimate adoption.
Naturally, any central bank will be motivated to promote its own digital currency. China, however, and other totalitarian regimes looking to establish legitimacy face an uphill climb given their tendency towards restriction and control while in the West, attempts to stifle use by central banks are restricted by democratic processes. This would certainly favor use cases in North America and increase the likelihood of success. What’s more, this certainly bolsters the narrative for Western blockchain companies, specifically US and Canadian based digital asset miners.
As an observation, China has always done a better job of maintaining a long term view. Their acknowledgement of the need for digital assets demonstrates we are all on the right path in the blockchain universe. Yet, the restrictions and control inherent to central authority inevitably impact innovation. For those that worry that an authoritarian regime will control the digital space, keep in mind that freedom always wins in the long run.
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