The Dragon Stirs

in LeoFinancelast month (edited)

"What wonders would the world behold if humanity's cultures we extolled"
Scholaris


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Introduction

Image by Prawny from Pixabay

I claim ignorance of life and this world. I only know about the things in front of my eyes. Humanity does, however, understand that there is more to life than what we perceive. Value, for example, is one concept we can't see but infer. We infer that the value of a thing is great if it is challenging to acquire. Similarly, the distance between you and something else affects your perception. A country, or galaxy, far, far away appears to have little significance upon your life-that is, until that land's actions impact your livelihood.

I hope everyone is well amidst life's turmoil. One particular topic I don't feel we cover enough is China. Similar to the USA and England of old, China is flexing its muscles. Its people are settling into a developing country that will soon match unless it already occurred, the technological might of first-world nations. One area China is already impacting resides in the world of digital currency.

China and the Digital Yuan

Elsa Boyd, Regard News

The digital Yuan is already here. China has been integrating and testing the concept of digital currency in a way no other nation dares through their Digital Currency Electronic Payment (DCEP) project. In August of 2020, The Chinese Central Bank reported that they completed the final stages of testing in the Greater Bay Area of Shenzhen, China.

The Chinese government plans on officially implementing the DCEP, including Hong Kong. It spent years testing this digital currency across Suzhou, Shenzhen, Xion'An, and Chengdu. They selected top-tier citizens to carry out their tests by using the money in everyday purchases.

China generated interest in the testing by offering digital currency as a lottery to contestants in the test cities. They issued over one million dollars to citizens that registered for the lottery contest.

National Impact

Image by wei zhu from Pixabay

China mandates that any business currently accepting digital payments shall accept the digital yuan. Companies that don't follow this mandate may be subject to fines or revocation of their license. Once China fully implements the DCEP currency, it will be the largest utilized in the world. It would have to be since China is using it to replace the conventional form of money.

DCEP

Image by RABAUZ from Pixabay

China's DCEP currency use heightens security. It is easier to track down digital transactions versus printed currency. Costs associated with generating or recycling bills also get eliminated. Finally, the transaction speeds of a government-backed digital currency would also surpass those of other services. China completed the development of the DCEP infrastructure. It just needs to complete the preparations for nationwide use, which may take years to finalize.

China will not set its DCEP currency for trade or speculation. The intent is to replace their Reserve Money systems with something that has low volatility. In a country dependent upon the control of its citizens, I imagine this is very important. However, low volatility in the value of any currency should be a goal. Shouldn't it?

The Trend is Spreading

Image by mohamed Hassan from Pixabay

Digital currencies are in development throughout multiple countries. Thailand is developing their central bank digital currency (CBDC) while Venezuela is trying to stabilize its economy through the use of the Petro.

Some sites report that digital currencies could boost growth and provide a more stable and efficient economy. Distribution would be easier if the infrastructure exists, and it may reduce reliance on the position of superpowers. How important would the USD be if a country's digital currency didn't rely on it? The value of the USD may lower as a result.

In a country like Venezuela, however, I'm not sure about the benefits of digital currencies given the volatility of their government. Here's hoping that their country improves sooner rather than later.

Government Currency vs. Bitcoin

Image by Vicki Hamilton from Pixabay

I initially wrote this portion of the article with references and charts describing the benefits of government-backed currency over decentralized ones. I deleted everything after realizing a straightforward fact the use of money depends upon trust. China and Venezuela are the only two countries using state digital currencies in any widespread fashion. They're also forcing their citizens to utilize the service.

Additionally, China hasn't yet breached the topic, in detail, of using the currency across state lines. Given that their current position is not to trade the new money, it's likely that China would keep it in-house.

Bitcoin seems to rise again following Elon Musk's change in position regarding the top cryptocurrency. Considering the plunge in value that occurs following the remarks of one person, it's easy to see why countries would require stability and low volatility in their currency. Such a need may be a reason for China refusing to place its DECP on the market.

In Closing

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Image by Gerd Altmann from Pixabay

Thank you for reading and following on throughout my Hive journey. I don't pretend to be knowledgeable about finances, but I do like reading about it. I welcome any comments that would help raise my understanding!

How do you feel about China's transition to a digital currency? Do you support and welcome it, or do you feel the conventional system works better?

Also, what's your take on Venezuela and its use of the Petro?

Don't forget to comment below! I look forward to engaging with everyone.

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You're welcome @scholaris, that's always a pleasure! Thanks for your motivation and your involvement 😊👍

well done for the effort making this post! you deserve reward.

Thank you very much!

However, low volatility in the value of any currency should be a goal. Shouldn't it?

This depends on the person. Probably not for speculators and daytraders.

How do you feel about China's transition to a digital currency? Do you support and welcome it, or do you feel the conventional system works better?

To be honest, I do not undestand either of them.
Some people say that it is equally bad, because the government controlls both. Some people say that its digital currency is worse, because the government achieves even more control with it.

Also, what's your take on Venezuela and its use of the Petro?

I am aware of the bad situation in Venezuela. I hope that it will get better as soon as possible. Either by Petro or by something else, it should be solved as soon as possible.

Thank you for your response.

Your comment about the currency's low volatility resonates with some comments by Chinese citizens. One comment said that the money wouldn't "be fun". Yeah, I guess it would be if you couldn't trade it on the market.

The government reports that transition to the digital currency will eliminate many problems resulting from illegal activities. It would also save them quite a bit of money from printing out a nation's worth of paper currency. What China doesn't communicate well is that it would grant them an additional level of control over the citizenry that we have not seen in our generation. Coupled with their social rating system, China will control someone's wealth to such a higher degree.

I hope things get better with Venezuela soon too. I hope whatever path they take works for them.


Posted via proofofbrain.io

Nice overview, just some remarks:

China's DCEP currency use heightens security

Most of all, it heightens surveillance & control, which is what the CCP wants. Every transaction is recorded & can be followed up on. It will probably become a bit harder to transfer money abroad, as well. For the time being it will not replace fiat money, though. There are still hundreds of millions of poor Chinese in rural areas who probably are not connected to the necessary infrastructure.

transaction speeds of a government-backed digital currency would also surpass those of other services

Dubious. Alipay & Wechat Pay already offer a similar functionality & there don't seem to be any problems regarding speed.

How important would the USD be if a country's digital currency didn't rely on it? The value of the USD may lower as a result

Perhaps, but improbable. As you rightly said in the last part of the article, it's a matter of trust. Experience shows that you cannot trust the CCP.
What's more, the CCP refuses to have the RMB traded freely. Which is another reason why many people are not really interested, I suppose.

Thank you very much for your review.

  • I hinted at China's seemingly extreme control measures, but I didn't expand on them and I should have. Thank you for your addition. My biggest concern about their system of control is their new social rating system. Combining it with digital currency will raise it to oppressive heights.
  • Regarding the poor of that country: I don't know what could be done about them as I don't imagine their social rating would be high. Additionally, as you mentioned, they wouldn't have access to digital technologies.

Regarding the trust in the USD:
I should have expanded my explanation. Again, thanks for the addition. I was thinking about the rise of other digital currencies when I wrote about the digital yuan. I wonder if those upcoming digital currencies could circumvent the influence of the dollar if, let's say in an example involving sanctions, the country can use digital currency to purchase materials outside of US influence.


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very informative sir. love reading it

Thank you for the compliment. I'm glad you liked it.