In its quest for strengthening digital dominance within the country, the Chinese government alongside the People’s Bank of China has embarked on the project of creating the country’s own digital currency. With this blockchain-based currency, Xi Jinping’s government took aim at taking more control of the financial transactions in the country while letting the business have more means of expansion.
According to the report from Beloit Bulletin, the People’s Bank of China is planning to initiate significant research that will measure the government-backed cryptocurrency’s effectiveness in improving the urban areas of Macau, as well as Hong Kong and Shenzhen.
A bitter-sweet relationship
It is no secret that the Chinese government is based on communism, an authoritarian ideology that neglects individual freedoms in the face of national interests. For this reason, almost every piece of technology that promotes people’s independence and emancipation was greeted with belligerence in China.
One of the pieces of similar technology was the blockchain. When Satoshi Nakamoto came up with the idea to create a peer-to-peer network for financial transactions, that is, to create money that knew no centralized governance, China was one of the first countries to oppose this technology. But why exactly?
For one thing, blockchain and its crypto money allowed people to make transactions at the highest level of encryption and anonymity. What this meant was that the Chinese government was effectively ousted from the financial relations between regular people. And since the government’s intentions are to have more monitoring mechanisms in every Chinese industry, that was not going to pass.
Besides, cryptocurrencies also enabled its users to make unrestricted transactions. This meant both internal and international payments, which, again, wasn’t in the best interest of the Chinese government. Therefore, it started to double down on blockchain technology: soon enough, every crypto exchange was banned in China, even the online platforms that merely registered the transaction times were taken down by the country’s Great Firewall.
Markets are taking their stance
Notwithstanding this level of belligerence from the government, many entities in the private sector started to incorporate blockchain technology anyway. A great example of this development in Macau, a gambling hub in China.
When Bitcoin’s popularity started to increase in 2016-2017, gambling companies all over the world started to realize that its technical characteristics were just ideal for their businesses. Online and offline casino-goers could use digital money to play their favorite games and be completely protected from hacker attacks.
In this sense, Scandinavian countries can be brought as a shining example: in Sweden, for instance, the government has made the internet and online resources surveillance-free, meaning that they can do whatever they want as long as the net neutrality is maintained. In Norway, the same level of freedom is guaranteed, although the government controls the online gambling facilities, yet encourages them to use cryptocurrencies as a form of payment
This also meant that a regular nettcasino customer that used crypto funds for gambling would be free from government monitoring, which, in turn, was a harbinger of their ability to gamble and not lose credit points on their bank accounts – a situation they have often found themselves in.
And the same thing happened in Macau, even though officially, crypto gambling in this region is completely forbidden. Underground gambling establishments that were quick to jump at the opportunity and incorporate Bitcoin into their platforms, actually accelerated the process of the Chinese government itself adopting blockchain.
China’s national digital currency
In September 2018, the People’s Bank of China made clear its intentions about creating the national digital currency that would first be piloted and tested in China’s so-called Silicon Valley, Shenzhen. According to financial experts, Shenzhen is the perfect place to do research and test out new blockchain products because the region houses lots of different blockchain companies with quite an extensive experience in the field.
Yet Shenzhen isn’t the only place where the national digital currency will thrive and let the region use its perks. According to Huang Zhen, the Professor of Economics and Finance at Central University, from Shenzhen and the testing stage, the national digital currency will spill over to other regions like Macau and Hong Kong in order to take their technological development to the next level.
For Macau, more specifically, having government-backed cryptocurrency as a major payment method will definitely be a gamechanger. Even though the government will still be able to monitor Chinese gamblers’ transactions, their security will still be maintained, leading to a much better casino experience.
Subjecting blockchain to the government monopoly
As it’s already apparent, the digital money issued by the People’s Bank of China will be in total control of Xi Jinping’s government. For this reason, we also need to talk about some of the benefits that cryptocurrencies have that won’t be available within the national digital currency of China.
First things first, the government will have all the monitoring tools for the blockchain transactions. This will mean that it’ll still be able to see where exactly the Chinese money is going and then take appropriate measures to either encourage or curb such behaviors.
Not only that, but the central bank will also be able to have a strict monetary policy over its digital token. This was one of the main reasons why Bitcoin was created: to do away with politically-induced inflation and inefficient monetary policies. And by being subject to that policy, even the blockchain-based money cannot be inflation-proof.
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