Bitcoin and cryptocurrency have this year successfully provoked central bankers and governments to take digital currencies seriously—though many remain skeptical.
The bitcoin price, which has failed to return to its all-time highs set in late 2017 despite a late December rally, was given a substantial boost in the first half of this year by social media giant Facebook’s plans for a bitcoin-like rival.
Now, China’s long-awaited answer to bitcoin and Facebook’s libra is taking shape, with People’s Bank of China confirming the “digital yuan” won’t be “for speculation or require the support of a basket of currencies”— leaving many disappointed and others concerned.
“The currency is not for speculation,” Mu Changchun, head of the People’s Bank of China’s digital currency research institute, said over the weekend, according to the official Shanghai Securities News and reported by China’s South China Morning Post newspaper.
“It is different to bitcoin or stable tokens, which can be used for speculation or require the support of a basket of currencies,” Mu said, with the newspaper adding “the top-level design, formulation, functional research and testing of the Digital Currency Electronic Payment had been completed,” with “the next step” to roll out pilot programmes.
The news was met with disappointment from China’s social media users, the South China Morning Post reported.
One said there will be “no fun in it,” while another added “if you don’t allow me to speculate on the digital form of the yuan, I’ll speculate on other things, like foreign exchange.”
Meanwhile, China’s plans for a bitcoin-rival have sparked fears Beijing will use the digital yuan to better control its citizens.
“A roller-coaster decade—not just for for banking and money but also for privacy and politics—may just be beginning,” wrote Andy Mukherjee for Bloomberg, a financial newswire.
“[China’s digital yuan is] far bigger than [bitcoin]. The crypto yuan, which may be on offer as soon as 2020, will be fully backed by the central bank of the world’s second-largest economy, drawing its value from the Chinese state’s ability to impose taxes in perpetuity,” Mukherjee wrote, adding “a digital yuan could bypass [the current deposit-based banking] system and allow any holder of the currency to have a deposit at the central bank, potentially making the state the monopoly supplier of money to retail customers.”
Mukherjee also warned other nations will follow China’s lead and that “anonymity disappears when cash does.”
Last month, outgoing European Central Bank executive board member Benoît Cœuré, who last year described bitcoin as “the evil spawn of the financial crisis,” outlined plans for a European “central bank digital currency” to rival the likes of Facebook’s libra and bitcoin.
Bitcoin, with its well-earned reputation as internet cash, is only going to become more important as regions, countries and companies try to control digital assets.