Posted 1 year ago | by Ben Armstrong

Major Powers Poorly Equipped to Compete in Digital Currency Space

Both the USA and China have been driving toward new kinds of digital currency options – but both nations are in a bad position to popularize a new form of global payments and savings.

A recent statement made by the People’s Bank of China (PBOC) via China Finance said that the state issuance and control of digital currency is a “new battlefield” between different countries as it gives the country great control over its monetary policy and growing prominence as a currency in the global market.

The article stated:

“China has many advantages and opportunities in issuing fiat digital currencies, so it should accelerate the pace to seize the first track.”

Unfortunately, China sees a digital currency as a way to move its control over society past its borders – and into the global community. People don't want to be the playthings of the CCP – and China has no way to force people to use its forthcoming CBDC.

China is Barking Up the Wrong CBDC Tree

The same article claimed that with enhanced monetary control, economic recovery from COVID-19 could be fast-tracked. In addition to the economic fallout from COVID-19 – China is also facing loads of other problems – like a shortage of food – and high inflation.

Sun Guofeng.the head of the monetary policy department in the PBoC, stated,

“To cope with all sorts of uncertainties, the monetary policy requires greater certainty.”

It isn't clear how China plans to solve a food shortage with digital money – but some see its programs as giving the nation a competitive advantage over other major powers.

In an interview with the media, co-author of Blockchain Revolution said:

“The two visions for these central bank digital currencies (CBDCs) couldn't be more different. Whereas the U.S. wants to protect the U.S. dollar as a global reserve currency, China wishes to export its own economic model around the world and tighten control at home”

This is – beyond any doubt – a totally insane worldview and will never happen. The US dollar will fail for its own reasons – and no one (aside from Chinese trading partners) will want to hold a Chinese digital currency as a reserve asset.

A False Dichotomy

The main objective of the digital yuan may to loosen the hegemony of the US dollar in the global economy – but it will fail in this regard.

Professor Eswar Prasad, a specialist in Trade Policy at Cornell University, speculate that China’s CBDC may increase the renminbi prominence as an international payment currency – but not in a substantial sense.

He stated that,

“But they (China) will hardly put a dent in the dollar’s status as the dominant global reserve currency...even when the IMF added the renminbi to the four existing currencies in the SDR basket and gave it a 10.9 percent weighting, it was mainly the euro, the pound, and the Japanese yen that gave way, not the dollar”

Rather than gaining provenance over the US dollar, Prasad pointed out that the rise of the digital yuan will affect the euro, the British pound, and the Japanese yen.

In truth – all of these currencies have major problems – and aren't likely to hold their values against hard assets over the next decade or two.

An Impossible Situation for Global Powers

As far as most people understand it – money is issued by a nation.

We don't need to use this model anymore – and as Bitcoin has demonstrated – there are some major incentives for people to move away from the nation state fiat currency model.

Don't expect central bankers to help the movement away from centralized currency – as they are still enjoying one of the most successful scams in recorded history.

China and the USA are both poor choices for a digital currency provider – and both are likely to lost the race to a new financial world order.

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About Ben Armstrong

ef4f73e9ddeb61becab57469962fa946?s=90&d=blank&r=g Major Powers Poorly Equipped to Compete in Digital Currency SpaceBen Armstrong is a YouTuber, podcaster, crypto enthusiast, & creator of BitBoyCrypto.com. Better known as BitBoy Crypto, he works hard to educate and inform the crypto community.

Ben has been involved with the world of cryptocurrency since 2012 when he first invested in Bitcoin. He used Charlie Shrem's BitInstant & lost Bitcoin in the Mt. Gox hack.

In 2018, Ben decided to go "full-time crypto" and focus all of his time and energy into expanding the reach of crypto.

If you have any questions or comments please feel free to email him at BitBoy@BitBoyCrypto.com or contact him on Twitter @BitBoy_Crypto.