The Chinese Government is Trying to Push a Fake Cryptocurrency

With the obvious value of projects such as Bitcoin, Ethereum, or Litecoin, many states are now looking to develop a digital currency tied to their central bank. One major player, trailblazing a path of their own, is the People’s Bank of China, who introduced the world to the Digital Yuan (Digital RMB) in early 2020.

The first test of the currency was run in September 2020, when coins totaling $1.5 million USD were handed out by the Chinese government, in a state lottery. The government arbitrarily chose 50,000 residents to receive a “red parcel”, each containing 200 yuan ($30.00 USD). 

At first, the coins could only be used with certain retailers such as local markets, drug stores, and select western corporations, including Walmart. In order to use their winnings, residents had to download a mobile app known as Renminbi (also the name of China’s currency), an app entirely controlled and monitored by the state. Further tests and lotteries were held, with the rollout of the coins extending to Chinese e-commerce platforms.

With most residents lacking access to banking infrastructure worldwide, cash is currently the primary form of payment in China, although payment systems such as AliPay and WeChat are growing fast. The digital yuan will go a long way to bringing many residents into the main Chinese economy, working well with these new digital payment systems, without the state having to build the necessary banking infrastructure.

China is using this new digital push to phase out its physical currency, but the main issue with this is that while cryptocurrencies such as Bitcoin are decentralized, currencies such as the digital yuan are controlled by the central bank; in this case, the Communist Party-controlled People’s Bank of China. 

For China, this move is sure to expand their influence, especially regionally, and will bring other benefits such as more efficient planning, as the state will have the ability to monitor every transaction conducted. 

Many see this as one step on what is a long journey to displace the USD’s status as the global reserve currency since many international organizations have been looking at a replacement due to repeated financial crises in America. China’s economy suffered far less than the US and other western nations from the pandemic, and as the world’s second-largest economy, China’s Renminbi would be an easy contender to replace the USD. Regardless of this outcome, this will certainly help bolster the Renminbi and the Chinese economy.

With the current heavily authoritarian nature of the Chinese state, many are worried that this is simply a push to establish a currency that is entirely within the control of the state. The digital currency of this form is far easier to monitor and control, every transaction can be watched, anyone deemed an “enemy of the state” can simply have their balance reset to 0 or have everything appropriated by the state.

Bank accounts were always subject to this type of state overreach, but at least with physical currency still available one could always stash a few bills for an emergency. China is now looking to eliminate this possibility entirely. This is particularly scary for China’s large Uyghur and Kazakh populations, as they are currently being subjugated to cultural genocide and this push could mean that they will only be easier targets for the state that is committing this atrocity.

In this respect the digital yuan reverses course on the main reasons cryptocurrencies based on blockchain technology have been so successful; being security, anonymity, and statelessness. People love Bitcoin because whether you are an oppressed minority in your nation, or a reporter traveling to a warzone, Bitcoin can follow you anywhere and be transferred into various fiat currencies to be used at your discretion, without the possibility of seizure. 

With all these hurdles and severe pitfalls, it appears as though the digital yuan, although not as volatile as many other cryptocurrencies, comes with far greater risk to one’s wealth; especially as China continues to sanction officials across Europe, Canada, and the United States. 

By contrast, there is a stable coin offered with a direct value to the USD, known as Tether (USDT), it is held at a 1:1 value with the USD just as the digital yuan is with the yuan, yet the USDT comes with all of the traditional benefits that come from the decentralized, and anonymous aspects of cryptocurrency.

While many cryptocurrencies can be a great investment, often seeing very significant returns; especially with the economic uncertainty of late, it appears as though one would be best to avoid the digital yuan altogether.