Since news emerged that China was in the market to create its own government-issued cryptocurrency, facts and information around the coin have been scarce. Still, some have seen it as a big stepping stone for the adoption of cryptocurrency, especially given the rise in interest in CBDCs since Davos.
On the other hand, there are detractors of the cryptocurrency who see this move from the notoriously controlling Chinese government as a way for them to use the technology to garner more control. And, it seems as if this second vire point is indeed the one that is coming forth.
Further information around the new Chinese cryptocurrency has emerged from a report by financial services company Huatai Securities. The biggest takeaway from the report is unsurprising – that it will be fully centralized – but what is of concern is just how the centralization of it has added more control to the government’s grip.
Nothing like Bitcoin
Seeing as Bitcoin and other decentralized cryptocurrencies are banned in China, it was never going to be the case that the People’s Bank of China’s offering would emulate Bitcoin. The report states:
“Unlike digital currencies under a decentralized system such as Bitcoin, this digital currency adopts a centralized management system.”
The centralized system will mean that the government in China has full control over it, as it does with traditional cash. However, it’s purely digital nature means there is a chance for even more stringent controls.
The digital currency is set to be run in a traditional manner, that is to say, the currency will be controlled by China’s central bank but issued through a selection of commercial banks. But, this also means the central bank will be the HQ where the digital currency is created, but also where transactions are approved. This means the government will have control over which transactions can be made.
It is a strong juxtaposition to see a cryptocurrency, which stems from the original Bitcoin intended to be a path of financial freedom, being used as another layer of control by a centralized force. For many cryptocurrency purists, this will be against the entire notion of the industry.
The catch 22 of it all is that this is a successful launch in China, no doubt other banks will be taking note, and the growth of such cryptocurrencies on a governmental level could be modelled after China. It would be huge for adoption, but the adoption would not be what everyone hoped for.