Digital Yuan Means Even More Control Over People of China

January 26, 2022 Updated: January 26, 2022

Commentary

Beijing takes the lead in central bank digital currencies (CBDC) and the new era of expanding monetary and currency control around the world.

Leave it to the world’s largest slave state to roll out the first national digital currency. Leveraging the global attention of the upcoming Winter Olympic Games in Beijing, the People’s Bank of China (PBOC) is preparing to present the digital yuan to the world.

It may well be the worst thing to come out of China since the CCP virus.

To understand why that may be, we need to know what a digital currency is.

A New Form of Money

Bitcoin was the first of a new form of money that was digital-based, not paper, coins, or any other form controlled by any financial institution. Cryptocurrency, via its many offerings today, is anonymous money that can be used throughout the world over the internet, beyond the control of central banks.

That’s the “crypto” part of the name, as “crypto” means “hidden.”

All cryptocurrencies are based on some form of blockchain technology, which simply put, is a distributed ledger system that provides an immutable but anonymous record of all transactions.

In short, digital or cryptocurrencies allow users to make untraceable transactions globally, that are unknown and untaxed by any financial authority.

An Antidote to Central Banks’ Loose Money?

Of course, the cryptocurrency world is complicated, with too many aspects to go into detail here. But it’s helpful to consider why digital currencies came about in the first place.

Bitcoin was the world’s first cryptocurrency, created, as you may recall, during the global financial crisis of 2008-09.

The crisis was largely brought about by risky, unsound policies by the Federal Reserve and other central banks and financial authorities around the world.

Loose monetary policies—such as printing money, lowering credit thresholds for borrowers, and ultra-low interest rates—distorted the U.S. housing market, triggered skyrocketing stock prices and prices for dollar-denominated goods and services around the world.

That dynamic is easy to understand. In a dollar-based global economy, when more dollars are printed by the Federal Reserve and injected into the economy, every dollar becomes less valuable, so prices for goods and services in dollars rise.

When such currency manipulation continues to the extreme, it often results in economic catastrophe. Markets and economies overheat and then collapse. Unfortunately, billions of ordinary people pay the price as their investments lose their value almost overnight.

Avoiding these recurring meltdowns was the idea behind the emergence of Bitcoin.

Epoch Times Photo
A representation of the virtual cryptocurrency Bitcoin is seen in this picture illustration taken on Oct. 19, 2021. (Edgar Su/Reuters)

A Threat to Global Banking–Including the PBOC

Naturally, without taxes and any sort of regulatory authority, cryptocurrencies enjoy worldwide appeal—for both legal and illegal transactions. But their very existence threatens the power of the global banking system.

Predictably, central banks, including the Federal Reserve and the PBOC, have been looking for ways to combat them.

Thus, the digital yuan is the Chinese Communist Party’s (CCP) response to cryptocurrencies. The ultimate purpose of national digital currencies is to replace not just paper money and coins with central bank-controlled currencies, but specifically, to eliminate cryptocurrencies altogether.

In some aspects, digital currencies such as the digital yuan are similar to well-established cryptocurrencies such as Bitcoin and others. But in critical areas, the emerging nationalized digital currencies are actually the complete opposite of cryptocurrencies.

In China’s case, for example, as the digital yuan comes into use, the cash economy will, probably sooner than later, cease to exist. When that happens, the CCP will have even greater control over its people.

The reasons are simple and powerful.

Whereas cryptocurrencies provide anonymity, the digital yuan will be entirely issued and controlled by the PBOC. Instead of a decentralized distributed ledger, the digital yuan ledger will be centralized at the PBOC. As a result, the CCP will have total visibility into every single account and all account activity.

Imagine, for instance, raising taxes on income or on specific goods or services. There would be no need to collect it in the traditional way, as the PBOC just deletes from your digital account. If you were a political dissenter, for example, your bank account may well be frozen or your assets seized with the click of a button.

Also, a digital currency can control what you buy–or cannot buy. You may not be able to buy tobacco, alcohol, or any other substance that your digital bank account won’t let you buy—all determined remotely and digitally—far beyond your control.

Essentially, when the money is controlled, almost every activity can be controlled. For a totalitarian society such as China, that’s a tremendous advantage.

The CBDCs Are Coming

But China isn’t the only country with CBDCs in its plans. The United States is right behind it with the digital dollar, as is the European Union and many others.

That prospect isn’t a happy one, either.

Consider how divided the United States is these days regarding vaccination status. The attempt by the federal government to control behavior based on whether one is fully vaccinated (whatever that happens to mean at any given time) could be much more successful if Washington controlled your access to your own money.

Like China and its digital yuan, the digital dollar is coming, sooner than later.

The bottom line is clear: when citizens’ money is controlled, or can be otherwise withheld without consent by a federal authority with little or no recourse, those citizens are no longer free.

One may rightly wonder, is communist China a picture of our own future?

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.

James Gorrie
James R. Gorrie is the author of “The China Crisis” (Wiley, 2013) and writes on his blog, TheBananaRepublican.com. He is based in Southern California.