China's Crypto Is All About Tracing — and Power

Xi Jinping,  President of the People's Republic of China 

This is very disturbing.

Bloomberg reports:

The coronavirus has disrupted the world in very large ways. While that battle has been waged, however, another event has almost been missed: the birth of a new kind of fiat currency, which could forever reshape the relationship between money, economic power and geopolitical clout.

An official Chinese digital yuan, more than five years in the making, is now in pilot runs to slowly start replacing the physical legal tender. If the experiment succeeds, this new cash, valued the same as the familiar banknotes bearing Mao Zedong’s image, will become the world’s first sovereign token to reside exclusively in the ether...

According to media reports, half the May transport subsidy for Suzhou municipal employees will be in the form of digital currency electronic payment, or DCEP, as it’s being called in the absence of a catchier moniker. The pilot plan in Xiong’an, a satellite city of Beijing, includes coffee shops, fast food, retailers, theaters and bookstores, Goldman Sachs Group Inc. has noted. The other trials are reserved for Chengdu and Shenzhen... the anonymity of cash will no longer exist. Authorities can look under the hood of pseudonymous transactions for unwanted activity, an outcome far removed from the vision that drove libertarians (and money launderers) to cryptocurrencies in the first place.

I early on warned of the dangers of digital currencies and how highly traceable they were, so although some libertarians have cheered on digital currencies not all have and it is an error to not make that distinction clear. There is nothing inherently libertarian about digital currencies.

But more significant, I don't believe most understand the biggest danger of such currencies. While tracing transactions that are made is horrific, if a country adopts an all-digital currency format it will mean the government can censor any book, any magazine or any other good it wants since it will have near real-time information on who might be violating such a ban.

It is known that the Federal Reserve is quietly working in the background on an eFed digital coin. This coin must be aggressively fought and not allowed to be introduced.

The introduction of a government-controlled digital currency would be a very immediate danger to liberty and only grow over time.

-RW

(ht Chris Barcelo)