Ever since bitcoin’s price set a new all-time high, people have been wondering what news would be spread to push the value down again. As was to be expected, China got a lot of attention. Apparently, the media only now discovered the country is working on its own digital currency to rival Bitcoin. The PBOC has been working on this project for some time now, as this is nothing “new” by any means.
China’s Digital Currency Will Fail
It is not hard to see why China’s plan to create a national digital currency will not succeed. The research began in 2014, yet there is still no white paper or information regarding the technology powering RMBcoin. While the PBoC has conducted trial runs of this new currency, very little practical information is known about it. No one knows how many coins there will be, how they will be stored, and how much control users will have over their funds.
On the last topic, the obvious answer would be “no more than you have with a bank account”. Central banks will never issue a currency that is not fully controlled by them. Do not expect the Chinese digital currency to grant consumers more privileges. Instead, it seems to take away even more of their power, as they will have little to no control of this digital money. In that regard, RMBcoin is very different from bitcoin and the two shouldn’t even be compared.
Online payments in China have exploded over the past few years. Scanning QR codes to make payments has almost become the new norm. Both of these factors attribute to the success of bitcoin in the country, even though it is scrutinized by the government. It is evident something will have to be done before bitcoin takes over the Chinese market altogether. Creating a central bank-issued digital currency seems almost like a desperate attempt, although it may find its place within Chinese culture.
For the PBoC, a digital currency they can fully control makes a lot of sense. The technology is available to introduce cost-cutting measures, as well as provide real-time data to monitor the financial ecosystem as a whole. The bank will know everything their customers do at any given time. On the other hand, it will also provide money supply growth insights and improve transparency. An interesting debacle, but one that is not “new news” by any stretch of the imagination.
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I would not dismiss the potential success of ANY government-backed currency, especially when that government exerts as much control as China does. There are a myriad number of ways they could push RMBCoin if they wanted to. Off the top of my head:
– Offer some sort of government backing / minimal value assurance.
– Mandate or incentivize online Chinese vendors to accept it as a payment option.
– Incentivize its use as a trade currency in exchanges (China could demand Chinese exchanges tax Bitcoin trades and waive this tax for RMBCoin, for example.)
I’m sure there’s plenty of other potential ideas, too, but that’s what immediately comes to mind. On top of that, if they did stuff like this, it would inevitably attract foreign interest and investment, which would only further the potential value of RMBCoin.
I am as bullish on Bitcoin as they come, but government-backed crypto is a legitimate threat.