Cryptocurrency

China’s Digital Currency Lead Threatens Global Democracy – ThinkAdvisor


What You Need to Know

  • China is leapfrogging the U.S. with a combination of monetary policy and embrace of blockchain technologies.
  • The Chinese government will use e-CNY to trace money flows into and out of citizens’ bank accounts.
  • China’s real motivation is to grow its power.

I’m often asked about the future of digital money.

As blockchain technology grows in acceptance and usage, digital money will dramatically change how the world’s financial system operates. This will, of course affect the way financial advisors do their jobs.

For more than 100 years, the U.S. has led the world in financial innovation. We’re the world’s leading economic power, the U.S. dollar is the world’s reserve currency, and our economic and political systems have helped to bring democracy to every corner of the planet.

But all that is under threat because the U.S. is no longer showing the leadership it once did. As a result, China is leapfrogging our nation with its own combination of monetary policy and embrace of blockchain technologies.

Ant Group’s Alipay and Tencent’s WeChat Pay, based in China, are already the largest fintech payment services in the world.

Now, the Chinese government is transitioning from paper money to a digital currency, via its launch of the e-CNY, aka the “digital yuan.” This is the digitized version of China’s legal currency, the renminbi (RMB), and it’s issued by the People’s Bank of China, China’s central bank.

The Chinese Communist Party says it wants to create more efficient payment services (business, consumer, and even social welfare payments), reduce corruption, and serve the underbanked — those without cellular or internet services. All that sounds noble. But China’s real motivation is to grow its power.

The Chinese government will use e-CNY to trace money flows into and out of citizens’ bank accounts. They’ll be able to see who you called on your phone, freeze your online accounts, and even seize assets from them. Indeed, the e-CNY lets the Chinese government punish its citizens for their social and political activism and criticism.

Such are the concerns raised by a striking new report from the Hoover Institution. This 227-page report on digital currencies urges the U.S. to launch its own Central Bank Digital Currency and allow for private-payment transactions that include stablecoins.

In the report’s foreword, former Secretary of State Condoleezza Rice writes that China “poses stark challenges for the United States and the world” and that “China’s ‘first mover’ advantage consolidates its lead in online payment technology, will elevate authoritarian norms and undermine principles of transparency, accountability, and human rights.” She urges U.S. authorities to “move energetically to develop a U.S. central bank digital currency to counter “this growing Chinese influence.”



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