Topic: China Moves Closer to Issuing Blockchain-based Currency - page 2. (Read 900 times)
Chinese Central Bank gave many reason for developing their own cryptocurrency like lower operating costs, greater efficiency, and better control of illicit money flows. But what I believe is that they are bringing their own cryptocurrency because of the increasing popularity of bitcoin. It is like if you can't beat them, join them.
See:
PBOC Hires Blockchain Engineers for Creating Digital RMB
This is great news for Bitcoin. At first, you would think this would reduce Chinese demand for Bitcoin, but if you think about it, the only reason for China to issue a blockchain-based currency is to inspire confidence in the yuan (renminbi,) to pull away from the current system of, in effect, backing the yuan with dollars.
China badly needs to shore up confidence in the yuan because it has inflated probably the biggest credit bubble in the world by propping up its economy with bad investments through debt and money issuance. It has recently appealed to patriotism in an attempt to stop Chinese from converting yuans into dollars by circumventing its capital controls (including through Bitcoin.)
The problem for China is, what will the US think of the new scheme?
Not only will the US not like the loss of leverage over China through the dollar system, but a crypto-backed Chinese currency would also be a potential threat to the supremacy of the dollar as the global reserve currency, since, such a currency would enjoy more investor confidence than fiat currencies (at least initially.) The only way the US can fight back is by undermining confidence in the Chinese crypto itself by supporting Bitcoin.
As I mentioned here and here, monetary affairs are not really driven by economics or finance, for the most part. They're driven by politics. It doesn't matter what form money takes, fiat, pegged to foreign currencies, pegged to gold, etc., when elites of major countries can't agree with each other, state-issued money suffers and non-state monies do well.
For example, in the 1960s, when first West Germany and the Netherlands, and then France, began redeeming their dollar reserves for gold at the Bretton Woods fixed price of $35/ounce, the only way the US could save itself was to abandon the fixed price in 1971, and to quickly re-legalize ownership of gold by Americans. Gold has jumped more than 30 times since then.
PBOC Hires Blockchain Engineers for Creating Digital RMB
This is great news for Bitcoin. At first, you would think this would reduce Chinese demand for Bitcoin, but if you think about it, the only reason for China to issue a blockchain-based currency is to inspire confidence in the yuan (renminbi,) to pull away from the current system of, in effect, backing the yuan with dollars.
China badly needs to shore up confidence in the yuan because it has inflated probably the biggest credit bubble in the world by propping up its economy with bad investments through debt and money issuance. It has recently appealed to patriotism in an attempt to stop Chinese from converting yuans into dollars by circumventing its capital controls (including through Bitcoin.)
The problem for China is, what will the US think of the new scheme?
Not only will the US not like the loss of leverage over China through the dollar system, but a crypto-backed Chinese currency would also be a potential threat to the supremacy of the dollar as the global reserve currency, since, such a currency would enjoy more investor confidence than fiat currencies (at least initially.) The only way the US can fight back is by undermining confidence in the Chinese crypto itself by supporting Bitcoin.
As I mentioned here and here, monetary affairs are not really driven by economics or finance, for the most part. They're driven by politics. It doesn't matter what form money takes, fiat, pegged to foreign currencies, pegged to gold, etc., when elites of major countries can't agree with each other, state-issued money suffers and non-state monies do well.
For example, in the 1960s, when first West Germany and the Netherlands, and then France, began redeeming their dollar reserves for gold at the Bretton Woods fixed price of $35/ounce, the only way the US could save itself was to abandon the fixed price in 1971, and to quickly re-legalize ownership of gold by Americans. Gold has jumped more than 30 times since then.
Jump to: