Blockchain Currency

Have you ever wondered why money is made of paper? Most people have probably never asked this question, but there was a time when people marveled at paper money as an exotic innovation.

When the Venetian merchant Marco Polo was traveling around Asia in the 13th century, he noted that the Mongol Emperor Kublai Khan “caused the bark of trees, made into something like paper, to pass for money over all his country.”

With apparent astonishment, Polo noted that this mulberry bark was issued “with as much solemnity and authority as if they were of pure gold or silver.”

Kublai Khan’s paper currency was tethered not to limited supplies of precious metals but to confidence in his government, allowing him to finance his empire. It also allowed his merchants to conduct trade along the Silk Road unburdened by cumbersome strings of metallic coins.

Such government-issued paper currency is now standard around the world. But this does not mean that the evolution of money has ended. Ever since Western Union conducted its first electronic funds transfer via telegraph in 1871, the world has been moving toward digital money.

A participant of the e-RMB trials shows a user’s interface displaying the digital currency. Photo: Xinhua

Today, 15 percent of all financial transactions worldwide, and 60 percent of financial transactions in the United States, are electronic funds transfers.

Many financial analysts predict that the future of money might be a “digital” version of the cash in your wallet.

And as in Marco Polo’s day, China is leading the “currency” revolution.

In October 2019, Chinese President Xi Jinping issued a ringing endorsement of “blockchain”—a new digital technology that enables cashless transactions.

Supporters of this technology say it might be the greatest innovation since the Internet. But President Xi is the first major world leader to really get behind it. He vowed to “seize the opportunity” to let China “take the leading position” in the blockchain revolution.

When most people hear about blockchain-based “cryptocurrencies”, they think of privately owned currencies like Bitcoin, Ripple and Libra. But what Xi is proposing is a “sovereign digital currency” issued by the People’s Bank of China.

If central banks like the U.S. Federal Reserve, the European Central Bank, and the People’s Bank of China start issuing digital currencies managed on a single blockchain network, it could upend the currency system that has dominated the world for decades.

A world of competing sovereign digital currencies would set up a new kind of currency “warfare.” And some financial analysts even believe that “e-yuan” and “e-euro” could end the dollar’s “reign” as world reserve currency.

The dollar’s days are numbered. And when the dollar collapses, the U.S. itself will collapse soon after. What will this post-American world look like? And what role will digital money play?

When President Xi said he wanted China to “seize the opportunity” to lead the blockchain revolution, he was not making an empty political promise. On April 20, 2020, about six months after his speech before the Central Politburo of the Communist Party of China, the People’s Bank of China confirmed it was testing a “digital yuan” in four cities: Shenzhen, Suzhou, Chengdu and Xiong’an.

This “Digital Currency Electronic Payment” (DEEP) has no paper or coin equivalent. Users must register their mobile phones and download an app to make deposits or transfer money. But since it is legal tender, it can be exchanged without needing a commercial bank as a middleman.

China wants a digital currency ready to go national by the time the 2022 Winter Olympics are held in Beijing.

The launch of a government run “digital payment system” is supposed to help the Chinese government combat money laundering, gambling and terror financing.

Other than a smartphone-based roll-out of the digital red back, the PBoC is also exploring ways of issuing physical mediums, like a card that can display balance and QR codes for transactions to serve the needs of senior citizens. Photo: Xinhua

Unlike privately owned cryptocurrencies, which boast about their ability to use blockchain to create financial transactions that cannot be traced by the government, China’s DCEP uses blockchain technology that can be traced by the government, because the government is the one issuing the digital strings of zeros and ones.

Ironically, a tool designed to aid anonymous transactions has become an Orwellian mass surveillance tool.

Two senior fellows at the Atlantic Council, Hung Tran and Barbara Matthews, wrote an editorial in August exposing the dangers of China’s digital currency. “The Chinese central bank’s ability to monitor DCEP transactions can help improve the efficacy of monetary and fiscal policy operations as well as make it easier to fight financial crimes including money laundering and the financing of terrorism. However, this will significantly strengthen the government’s social credit scoring system, used to control its citizens by rewarding or punishing their behaviors. Basically, the more citizens that use DCEP instead of physical cash, the more the government can monitor and control their lives.”

Using blockchain technology, if a Chinese citizen misses an automobile payment, he could theoretically be electronically locked out of his car; he also could find himself locked out of his apartment; even his electricity or water supply could be automatically denied as soon as he stopped paying his bills. Citizens who do not pay taxes could be excluded from all public services, purportedly to prevent any individual or company from cheating the system.

And if the United States tries to use economic sanctions to punish China for human rights abuses, its digital yuan may make such sanctions nearly impossible to enforce. Like most of the world, Communist China currently relies on the dollar payment system to make international financial transactions.

But issuing “digital Yuan’s” would help China move away from the dollar and ultimately bypass international financial systems subject to U.S. laws. Companies and financial institutions that wanted to do business with the People’s Bank of China could do so directly, using wallets of digital yuan, instead of having to work through a network of commercial banks conducting business with dollars.

China has been trying to move away from what it sees as a suppressive American payment system for years, but every attempt to increase the use of the yuan in Asia alone was only mildly successful. When it comes to international trade, a digital yuan would also be of limited value. China would likely still need to go through the burdensome process of buying dollars that are universally accepted. But this changes if other economic blocs also use a digital currency.

While China is spearheading the digital currency revolution, former German Minister of Economics and Technology Karl-Theodor zu Guttenberg is warning that Europe is sleeping through the digitization. “I am convinced that blockchain will evolve and become very important,” he told an audience in Switzerland in 2016. “The technology could speed up transactions and save banks money, the middle man would become obsolete. I hope that Europe will come to its senses, build a strong blockchain hub, and not leave this development to the other side of the Atlantic.”

Such an anti-American alliance would obviously have no interest trading in dollars.

The 200 German lenders represented by the Association of German Banks believe a government-backed, digital euro would prevent decentralized alternatives, such as Bitcoin or Libra, from destabilizing Europe’s financial systems. They also believe that such a currency would enable the establishment of a streamlined pan-European payments platform.

Other Euro zone nations also want to establish a digital euro, lest China’s digital revolution leave Europe behind.

In May, Banque de France announced the successful test of a blockchain transaction with a digital euro. In the test, Société Générale, one of France’s biggest investment banks, issued €40 million (US$44.3 million) of covered bonds as security tokens. The bonds were then directly registered on a public blockchain and settled as digital Euros. Banque de France plans to conduct more tests with other parties, eventually including financial institutions and companies.

Policymakers at the European Central Bank have discussed the creation of a “Central Bank Digital Currency” (CBDC) similar to China’s Digital Currency Electronic Payment. Although, unlike the People’s Bank of China, the European Central Bank has not announced when it wants its digital currency to go national.

Such announcements are harder to make in the Euro zone, where 19 individual states still have a say in such financial decisions. But the near-simultaneous launch of a digital yuan and a digital euro would rock the world with an entirely new way of doing business!

If Europe and Asia acted together, they could dethrone the dollar and revolutionize global finance to an extent not seen since the Chinese introduced the world to paper money. Amazingly, the Bible prophesied of an end-time economic alliance against America long before the Lydian’s first started minting metallic coins.

Such an alliance would obviously have no interest trading in dollars. This means the process of international trade that the dollar currently provides would have to be replaced. A “Blockchain Services Network” allowing digital yuan, digital yen and digital Euros to be electronically traded would open up a myriad of alternative reserve currency options.

Launching the digital currency is meant to safeguard Beijing’s currency sovereignty amid challenges from unregulated cryptocurrencies issued by private firms, the PBoC says. Photo: Handout

A massive banking crisis in America “could suddenly result in triggering European nations to unite as a new world power, larger than either the Soviet Union or the U.S.” This unification of core European nations could also be accompanied by a new digital currency.

As the 2008 financial crisis showed, a banking crisis could easily cause the dollar to collapse. America’s enemies are aware of this fact, and may even try to purposely provoke such a crisis.

We have not yet seen the end of the push for new reserve currencies. Nor have we seen the end of hostility against America. Though the digital currencies and Blockchain Services Network are cutting-edge technologies, the dollar may face real competition as the world’s dominant currency.

Beijing to bypass US systems with e-RMB drive

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