The People’s Bank of China announced last month that it considers its digital currency to be “ready.” The long arc of cryptocurrency history pushes us toward this moment. Eventually, banks and governments will have to figure out a way to compete with the ease, convenience, and power of cryptocurrency.
China isn’t even the first country to consider creating a fully digitized money system. Despite full-scale bans on things like ICO trading, China’s going full digital. It’s still ‘fiat’ currency – technically speaking. How many of China’s more than 1 billion people actually care about their Yuan being centralized and subject to the whims of government hacks?
Not as many as we might prefer, here in the crypto industry, and the situation is no different in the United States or elsewhere. Awareness of the criminal banking cartel is only the first step to financial liberation.
China Bans Crypto Exchanges While Building Digital RMB
However, as the reader is probably aware, China as a whole has played an extremely important role in the development of Bitcoin and other cryptocurrencies.
For years, Chinese miners dominated the network, finding most blocks. The only remaining large-scaling mining hardware producer is China’s Bitmain. Bitmain CEO Jihan Wu wielded his influence in favor of Bitcoin Cash during the plateau of the drawn-out scaling debates.
The world’s biggest crypto exchange, Binance, hails from China originally. They’ve since moved their headquarters to Malta, since China decided to shutter its growing crypto exchange industry.
Not to confuse the issue: China does not desire nor is it developing an official cryptocurrency. The rules of consensus in the new system will be the same as they are in the existing fiat system: whatever the central bankers decide they are.
What the digital currency will offer, however, is a convenient and digital way to move funds. In short, it will offer the same thing that Tether, TrueUSD, USD Coin, Paxos Standard, and others have offered for quite some time now. As Tory Reiss of TrustToken, the maker of TrueUSD, has said:
China takes currency control very seriously, and as they’ve demonstrated in the past, and again with cryptocurrency, anything that poses a risk to their centralized control will be dealt with quickly. That being said, just because something is outlawed, doesn’t mean it goes out of use. I think Bitcoin will still see significant use in China, but it’s being forced to the fringes. I also believe that China is only the first government to move towards issuing their own digital currency and there’s going to be many to follow. I’d say we’ll hear of a few more in 2020 and we could see the first of the G8 by 2023. Canada or Japan would be my pick, but only time will tell.
As mentioned above, Chinese people don’t have a convenient or legal means to buy, hold, and trade cryptocurrency at present. Like many things in China, the black market is therefore quite reliable, or so this reporter is told by friends who spend a great deal of time on the mainland. Therefore, the effect of China’s digital currency itself will not be immediate.
Will All The World Use Digital Currency?
But where China goes, others follow. Denmark has been working on the idea of going completely cashless for years, while major banks in Japan are launching more digital options.
These things mimic cryptocurrency, but don’t go all the way, which probably relieves companies like Ripple, whose business model is built on the idea of reducing friction for large-scale transactions between institutions.
Chinese banks may never need a product like Ripple; the only question at this point is whether official digital options will reduce costs and fees or not. Assuming that the path China is going down – where the majority of people will use their digital devices to pay and be paid – becomes the global norm, stablecoins and institutionally-geared cryptocurrencies may be in some trouble.
For example, if the US government and the Federal Reserve decided to follow suit, US-based exchanges would quickly be able to integrate with banks in much more intimate ways.
If you will, imagine simply scanning your mobile device, authorizing access with your fingerprint, and thus being able to make instant deposits and withdrawals. At that point, do you have any need for a stablecoin? And if you’re a bank or other large institution in this near-future world, do you have any need of products like Ripple, Stellar, or JPMorgan Coin?