Posted 2 years ago | by Ben Armstrong
US Stifling Growth While China Embraces Crypto
Just as Bitcoin is struggling to stay above $11k, there could be some bad news for those who love Bitcoin. This could end up being the biggest story for cryptocurrency in 2019. The entire country of China could be about to adopt cryptocurrency... and it may be bad news.
The US-China Trade War has been dominating the news as of late as many people search for ways to hedge their assets. Bitcoin is now being seen as a safe hedge for those seeking to flee fiat currency investments. Along with stocks, fiat currency values across the world are plunging due to global uncertainty.
China recently devalued their currency, the yuan, in an attempt to combat tariffs imposed by US President Donald Trump. In reaction, Trump labeled China as a currency manipulator. This paves the way for the US to push for economic sanctions against China. This could have a huge impact on the upside for Bitcoin and on the downside for traditional financial markets.
But there could be something much larger coming into play for the Chinese government. To understand exactly where China may be heading, look no further than Facebook's Libra coin.
Earlier this year, Facebook announced that it would be launching a stable coin called Libra. This was met very unfavorably by US politicians as they claimed that Facebook was basically trying to create its own currency.
Fears that this currency could harm the US Dollar were rampant. President Trump & lawmakers from Capitol Hill made many negative comments toward Facebook's plan for Libra. Many legislators actually made positive statements about Bitcoin while panning Libra.
Both the Congress & Senate summoned Facebook to inform them about Libra during public hearings. Even as the hearings were going on, some legislators began creating laws to stop Facebook and other tech companies from starting cryptocurrencies. The argument behind this was that tech companies should stay in the tech lane and stop trying to become their own banks.
This has led to a gridlock on Libra that forced Facebook to admit to investors that Libra may not launch in 2020 as expected... and it may not launch at all due to the legislative pushback and the uncertainty of regulation. Facebook had certainly anticipated pushback, but not to the level that it saw after its Libra announcement.
So what does this have to do with China?
US versus China is the new Cold War. While the last Cold War was fought over communism and nuclear weapons, the new one is going to be a technology war. While the US-China Trade War is raging on, China is planning a larger fight affecting much more than trade. China will fight this war through hacking, outpacing the United States in technological development, & establishing itself as the leader in cryptocurrency & blockchain development.
Right now, China is finding its edge. While the United States government is fighting hard to stop Facebook from creating a rival to the US Dollar, China is creating one right under their noses. China has taken advantage of the fact that the complicated regulatory environment in the United States is stifling growth and discouraging new players to enter the blockchain scene.
A Chinese official broke this news according to The Block crypto news publication:
Mu Changchun, Deputy Chief in the Payment and Settlement Division of the People’s Bank of China (PBOC,) stated that the CBDC prototype exists and the PBOC's Digital Money Research Group has already fully adopted the blockchain architecture for the currency. China's CBDC will not rely entirely on a pure blockchain architecture, as this would not allow the currency to achieve the throughput required for retail usage.
The key part in the statement is that the currency will be built in a way that will allow "retail usage". Retail usage implies that the plan for CBDC is to be able to be spent both online and in brick and mortar stores. The United States is years away from even considering this.
China wants to pass the United States and become the biggest superpower in the world in terms of economies. By creating a cryptocurrency that can be spent anywhere, China may just gain the edge it needs. If stores in China are accepting the digital currency, then what would stop stores in the surrounding Asian countries from also accepting the currency
With cryptocurrency there is no physical exchange needed. For instance, if a person wanted to spend Canadian dollars in the United States, it would have to be converted into USD as the vast majority of stores in the United States do not taking Canadian dollars. Canadian credit cards also charge a 2.5% fee on transactions done in the United States by Canadian card holders. Cross border transaction settlements are very difficult and cumbersome.
With China's CBDC, cross border settlements would not be an issue. This could open up CBDC to be used outside of China, outside of Asia, & beyond... with no fees.
While the United States government is busy spending money, time, & resources to stop an American tech company from creating an alternative to the US Dollar, China is creating something far more dangerous. With this plan moving forward, China would be able to control the supply & the inflation of the digital currency which runs counter to the idea of cryptocurrency & decentralization.
Blockchain has the opportunity to be one of the greatest creations of the modern era... or one of the worst. Unfortunately, if the oppressive Chinese government is allowed to take hold of the reigns of cryptocurrency, it may be the latter.