China is instituting a digital yuan because it wants to spy on the people who use it. From Milton Ezrati at The Epoch Times via zerohedge.com:
Ever since China launched its digital yuan in 2019, western commentary has reacted to the initiative with waves of nonsense. Many of these articles suggest that the People’s Bank of China (PBOC) has stolen a march on the West. Many claim that China’s digital effort will secure the yuan global status and enable it to supplant the dollar as the world’s premier currency for international reserves and transactions.
The venerable Economist magazine forecast that soon everyone everywhere will be using the digital yuan. The most recent wave of such commentary emerged after the Federal Reserve (Fed) and other central banks announced that they, too, are looking into digital versions of their own respective currencies. Media attention has suggested that the Fed and others are playing catch up.
These claims are overblown to say the least, entirely misplaced, in fact. A digital yuan hardly constitutes a basis for a global currency. Many countries, including the United States, have laws against transacting domestic business in any currency other than their own. Besides, a digital yuan could add only marginally to existing digital arrangements in which credit and debit cards, Apple watches, PayPal, easy wire transfers, and the like have long-provided efficient and convenient ways to manage both international and domestic transactions. All the digital yuan would do is add a new layer to this fully functioning system. That addition hardly constitutes a revolution, any more than if American Express were to issue a new kind of card. Nor will a digital version of the yuan overcome all the many impediments in the way of its ability to become the premier global reserve currency.
Central bank digital currencies aren’t going to fix the mess central banks have made of their non-digital currencies. From Tom Luongo at tomluongo.me:
One of the things that converted me to the Austrian way of thinking about the economy was the concept of money with an expiration date. Early articles at Lewrockwell.com and Mises.org covering hyperinflations of various forms and kinds horrified me when banknotes and government scrip reached the point of forcing people to spend money versus having it lose its ‘legal tender’ status.
Money that ‘expired’ like points on your credit card was simply a horrifying idea.
Martin Armstrong makes the point all the time that the main reason why the U.S. dollar is the world’s reserve currency is because it is the only modern government-issued currency that hasn’t been defaulted on in over two hundred years.
In fact, it was the consolidation of the Colonial government debt held over from the Revolutionary War which ultimately doomed the government under the Articles of Confederation giving rise to the current U.S. constitution and its monopoly power to issue dollars.
That power gave the Constitution its power as an international player, telling the world the new government honored its debts. The inability of the ECB today to control the debt issuance of the euro-zone states is that currency zone’s fatal flaw and why any move towards consolidation of that power is the goal of all EU fiscal and EU monetary policy.
Absent that the EU is doomed to the same fate as the Articles of Confederation.
Fast forward to today with the world awaiting the birth of the first Central Bank Digital Currency (CBDC), the Digital Yuan from China, and we see the concept of expiration being embedded directly into what looks like the next monetary system planned for us.
We’ve come full circle, folks.
Bitcoin is a truly revolutionary idea that allows people to transact and store value away from the prying eyes of governments. China’s digital currency is just another state-issued currencies that gives the Chinese government even more control over the lives of its citizens. From Peter C. Earle at aier.org:
China’s digital currency has left the testing stage and is set for a full rollout to the entire country and region. For some reason, the major media stories on the topic circle around the issue of Bitcoin, invented in 2009 as an alternative to government paper money.
Just because a money has the word “digital” in the title doesn’t mean it is a form of Bitcoin. It is not. It is nothing more than a government currency with a different delivery system.
- The digital Yuan does not live on a public ledger. It is controlled centrally by Chinese authorities, to be changed if, as, and when political whims require such.
- The digital Yuan is not a peer-to-peer currency but rather requires the use of officially regulated financial intermediation.
- The digital Yuan does not have a market-based valuation independent of the old version of the currency. They are tied together.
- The digital Yuan does not have an algorithmic protocol dictating the production of new assets (akin to money creation), much less an end date at which point no more will be created. It is a currency with a discretionary money supply controlled by the government.
- The digital Yuan is programmable to the point that the currency can be made to expire, thus forcing consumers to use it up by a certain date. This is a twist on an obscure, unconventional monetary policy innovation known as a Gesell currency: expiring money, which gives the issuing government a heightened degree of control over money velocity.
- The digital Yuan permits a new method for surveilling the population, creating new data which can be tracked by authorities. Bitcoin has pseudonymous protections for user privacy.