Digital currencies from governments, a reasonable economic move or an attempt to take power away from cryptocurrencies?

in LeoFinance11 days ago

Several governments plan to launch or have already launched their own 'cryptocurrencies' in an attempt to adapt to the new times, but such currencies may have a darker purpose. Let's talk about it here.



Hello dear friends of leofinance, I hope you are all very well. Today I want to talk about an issue that is gradually generating more headlines every day, that is, the information of certain governments working on their own digital currency projects, and how this gives a glimpse of the intentions of the powerful.

Of course I will use the example of the Digital Yuan of the People's Republic of China as the most developed project, but I will also talk about a couple of other cases. But before I continue, something must be clarified.

All the cases I have investigated so far of governments working on digital currencies are not cryptocurrency projects, but are CBDCs, [Central Bank Digital Currency] digital currencies of central banks. They are not cryptocurrencies because they lack the basic foundation that gives them their name, which is their cryptographic nature, which protects them from double spending, allows anonymity to their users and are usually Decentralized. This clarification is important because around these points revolves everything else we will discuss here.

Now then. In the following map we can see a progress of the digital currency projects of central banks around the world.



If you click on the link at the end of the image you can see more details about each particular project, but it is obvious, the interest of governments in digital currencies has increased exponentially, about this I have already written a couple of articles.

These currencies, on a purely technical level should not be a real competition for cryptocurrencies like Bitcoin or Ethereum. The issue is that in practice they may end up being so due to the coercion of governments in their domestic markets, in the process taking away from their population the vast majority of the benefits that drove them to cryptocurrencies in the first place.

An example of this is the Chinese digital Yuan, which already has [as of November last year] 140 million users and had a capitalization of $9.7 Billion by that date according to Chinese central bank sources. Undoubtedly a measure that clearly points to a measure to modernize the economy, streamlining digital payments and eliminating the need for paper money, but behind the 'success' of the Chinese digital yuan, is the ominous question so it was not the digital yuan, what other option had the population of China, especially those who had already invested in cryptocurrencies, after the ban of the same in the nation last year9

But the digital yuan is a poor substitute for the one that had bitcoins, since it is under the control of the central bank of China, at the same time under the control of the Chinese communist party, which has ruled the country for decades, this not only eliminates the possibility of privacy in transactions, but also allows the government to use its Social Credit system https://en. on people's personal finances, basically taking away any vestige of economic freedom, but the shortcomings of CBDCs don't end there, being under the control [whims] of governments, and not entirely governed by a public and unalterable contract, they can be inflated. Or be subject to overspending by government agencies.

But without a doubt, not all governments are as authoritarian as the Chinese communist party, or at least, they are not as successful trying, for example the case of my own country, Venezuela with its digital currency petro, which was a monumental failure because by the time of its launch the circulation of digital currencies in the country was little, and they could not force it with laws in the economy, the laws of the market acted, and as nobody trusts the inept regime in Caracas, the petro went into obscurity.

But recently the government of the country launched the new project of the digital Bolivar, which it can be argued, has had a better result, this because with certain similarity to the case of China, the government did not leave many options to the population, if the government entities charge taxes, stick, give credits and charge them in the new currency, eventually everyone who makes economic life in the country will have no choice but to invest at least a part of their assets in such currency. This is called state coercion. And it can come in many ways.



Either through taxing private cryptocurrencies that would make it unprofitable to use them in the country, strict bureaucratic regulations to slow down the process of using them or simply banning private cryptocurrencies, while funding, advertising, and forcing the use of their own digital currency in the economy. State coercion is what can make CBDCs strong... but this same advantage is what also makes them to be viewed with skepticism in many places, because those who invest in cryptocurrencies are not only looking for a means of digital payments, they are looking for privacy, security, international economic opportunities, access to new technologies and economic dynamics, and that cannot be offered by any government nowadays... since the main purpose of governments is to continue governing.

And to continue ruling, an unscrupulous government could well resort to our digital wallets to freeze our assets if we speak out against it.

But can there be a balance...could a government decide to create its own digital currency and still peacefully coexist with cryptocurrencies9 as the chairman of the just of the united states federal reserve says yes.

While this in itself does not say much about the future of cryptocurrency regulation in the U.S., it is indicative that the issue is being discussed at the highest levels of the nation's economic government. 2022 promises to be an interesting year for cryptocurrencies in that country, and because of its status in the world, perhaps its decisions will be emulated by many other nations.

Undoubtedly we live in interesting times dear friends. If you liked my post and want me to continue informing you about recent events in the world of cryptocurrencies.

Recommended Bibliographic Reference

[1] Que hará el régimen para combatir las monedas digitales privadas

[2] 95 billion spect using chinese central Banks digital currency official 2021-11-03

[3] government cryptocurrency bitcoin ethereum