China makes headlines this week as the first country to introduce a digital currency from its central banks.
William Suberg at Cointelegraph reports on new announcements for a pilot program for a “digital yuan” where Chinese government agencies will release digital assets to the central banks and financial institutions, to have them trickle down into the general economy.
Despite the fanfare about this Middle Kingdom effort, many naysayers have come out of the woodwork to talk about why China’s CBDC may end up being a dud in many ways.
“Despite the excitement surrounding this announcement, little in it is new,” writes Milton Ezrati Nov. 6 at City Journal. “The two-tiered approach, after all, is exactly the way money now enters economies worldwide. Central banks authorize commercial banks and other “operating institutions” to create money deposits to the extent that they are backed by their reserves. A person’s checking account—whether held in London, Topeka, or Pune, India—has a direct link to reserves at his respective national central bank. These same systems, globally, offer a digital element if one wants it. Certainly, the central banks’ reserves are digital entries akin to deposits at commercial banks.”
Ezrati also negs the digital coin as an incongruous play for an authoritarian government.
“Beijing’s demands for control and the resulting reluctance to allow open, easy trading in the yuan is exactly what makes continued media coverage so preposterous.” Ezrati writes. “No currency that denies free trading and free movement can become the world’s premier reserve and international currency.”
Then in Bloomberg’s ‘quick take’ on the topic, you have an evaluation of the coin balanced against the original idea of decentralized cryptocurrency.
When we say cryptocurrency, we usually mean an offering such as Bitcoin that uses decentralized, online ledgers known as blockchain to verify and record transactions,” writes a staffer. “The (new Chinese digital yuan) will, of course, back the digital yuan, making the currency the opposite of decentralized. It’s also not certain that it will use blockchain, either.”
Look for more as the new Chinese pilot goes into production.