They can use the world’s first state superpower to deepen the dictatorship

Chinese super money is already being tested

China has been working on digitizing the yuan since 2014, initially a state institution, the Digital Foreign Exchange Research Institute, experimented with the project, and then the central bank also picked up the thread. The first central bank experiments took place at the end of 2019, and then, in 2020, the events multiplied.

In April, the central bank launched the digital yuan in four Chinese cities; In Shenzhen, Suzhou, Chengdu and Xingan south of Beijing, as well as in the areas where the 2022 Winter Olympics will take place. The entire population has not yet participated in the experiments, but the system is already operational from a technological point of view: Government workers started receiving part of their salary in digital currency from May.

Public employees were able to purchase food, consumer goods, and public transport tickets in digital currencies. For example, you can pay with it on the Didi Chusing community car app, Bilibili streaming platform, Meituan Dianping restaurant chain, and McDonald’s.

By the way, it is not known when China will be ready with the national system, the vice president of the central bank said last year that the system will be “ready soon” and then added that no specific date has been set for the national introduction. Whatever the exact date, based on current position, there is a good chance that China will be the first country to issue central bank digital money.

It will not be related to the virtual currencies known until now

Not much is known about the system yet, but it probably works in practice that

• users download a digital wallet, to which they can transfer their money registered in the banks or even request their payment here,
• the value of the digital yuan registered in the wallets will be the same as the traditional yuan, that is, a so-called stablecoinról will be
• through applications a They can pay by scanning a QR code or tapping NFC users (the NFC solution can also be used offline).

From a technical point of view, so far you can know that the digital yuan

• it will not be decentralized or anonymous, like most virtual currencies, the Chinese state or the central bank will operate the back-end infrastructure: all the transactions that are made through the system will be seen,
• probably nem blockchain will be executed
• Although one of the basic ideas of digital central bank money is to keep accounts directly with the central bank, in the case of China so far it seems they would not exclude banks from providing money to the population. This is evidenced, among other things, by the fact that in August, China Construction Bank accidentally put together its own yuan digital wallet and then quickly withdrew it.

Apparently in practice the digital yuan will not differ much from mobile payment systems, which are very common in China; a significant proportion of the country’s population, around one billion people, pay regularly with AliPay or WeChat Pay. In the first quarter of 2020 alone, these apps managed 53 billion yuan. It is conceivable that a central system is cheaper, faster than current mobile payment systems, but so far there is no indication of that.

You can deepen the dictatorship

To the best of our knowledge and belief, there will be a novelty in the technical aspect, of which users will not perceive much, and on the other hand, it is likely that the State wants to transfer control of the payment systems from public companies to companies. public financial institutions.

Furthermore, an important factor is that digitizing the yuan in this way could also help the Chinese state surveillance system control the population, as well as serve the functioning of the social credit system.

With a digital yuan:

• the Chinese state sees exactly when, who spends what, to whom it sends money, On the one hand, the Chinese authorities will be able to combat money laundering and other crimes more effectively and, on the other hand, their political opponents will be easier to identify,
• easier the authority can also influence who spends what, what assets they have access to. It is also not inconceivable, for example, that if a Chinese citizen has a low social credit rating, they will not be allowed to access certain assets, buy,
• the state can control how much money goes abroad, you can even stop the largest capital withdrawals,
• or It can also reduce the influence of Chinese currency on foreign players.that is, with such a system, China can even circumvent international sanctions,
• displace (at least within the country) other digital currencies, like bitcoin or Facebook Libra, once it actually happens,
• can topple Ant Financial and Tencent about mobile payment systems domain,
• and although most in China financial transaction, around 83% is already electronic, in a few years this number could increase to 100% with the system.

In short, therefore, the digitization of the yuan is driving water to the mill of the Chinese state surveillance machine, this project It can be an important pillar of the social credit system that is being built in the country., in which the population of China is ranked based on their political loyalty, business, and behavior:

Elsewhere it is built similarly, but not like this

Based on the previous paragraph, it could be a mistake to say that a “similar” system is being built in other countries, so it is more appropriate to say that other countries are also experimenting with their own virtual currencies, which will be radically different from the Chinese digital yuan.

Sweden has also made considerable progress in the development of central bank digital money., here from February this year to February 2021, the idea of ​​an official virtual currency will be tested. The system developed by Accenture has the following known characteristics:

• like most virtual currencies currently in circulation, it uses shared ledger technology,
• In the test environment, testers can store their electronic crowns in a digital wallet. The user can access the digital wallet through a mobile tab, through which they can make a deposit, send and receive an electronic crown.
• The pilot will also analyze how to transact electronic crowns offline without internet access.
• An important difference compared to public cryptocurrency systems is that the Corda system used for the electronic crown consumes significantly less energy, is robust and scalable, and is much more similar to the payment systems in use.

Besides Sweden and China

• Uruguay Back in 2017, it tested digital weight, which could be used to transact on a mobile tab, but it was not blockchain-based yet.
• Singapore and Canada jointly tested two separate digital currencies that operate on other systems for international business transactions, and Accenture and JP Morgan also participated in the tests.
• Experiment with money from your own digital central bank Bahamas and Thailand is.

Cover image: Getty Images