Central banks around the globe have, in recent years, been debating whether they should create a digital currency and what the ramifications may be. It appears China has just answered any and all questions on whether a digital currency is viable with the recent announcement that the country’s central bank, the People’s Bank of China (PBOC), is set to unveil its own central bank digital currency (CBDC).
It is a natural progression for the Chinese to move to a centralized cryptocurrency since they are already a truly cashless society. Nearly 100% of payment transactions within China are already conducted via mobile phones and digital wallets.
Other countries (the U.S. included) have a significant percentage of their population that fall within the underbanked or unbanked categories, with no access to a bank account, much less a mobile phone. By contrast, several Asian countries have already become almost entirely cashless, and are also ripe to move forward with their own CBDCs in the future as well.
Of course, one major concern with regard to China’s CBDC is that the government, through controlling their private blockchain-based transactions, will certainly be able to monitor its population even more closely and exert capital flight controls.
While a CBDC sounds very progressive, it is not without some potential dangers that could certainly crimp economic freedoms on individuals.
One example glaringly points out the potential pitfalls. The European Union created legislation last year making it illegal to transact over 10,000 Euros in cash. Would legislation like that result in every transaction needing some kind of state approval to happen? Could people who disagree politically with the government have transactions censored and their digital wallets frozen so they would be blocked from making any transactions?
Certainly the Chinese government does not have to be concerned with public sentiment since it is creating and will control the CBDC. Which opens a new thought. Could Bitcoin actually be the answer for a global digital (crypto) currency since it is not subject to any government control? Of course, that’s the allure AND the fear of any state government.
China is already out in front with the pending launch of their CBDC. Surely other major countries may soon try to follow suit.