In October 2019, Xi Jinping made a historic speech in which he made Blockchain a top technology priority for China's future. At the heart of his speech, Xi Jinping also announced that the country should redouble its efforts to develop its own digital currency: the digital yuan.
A little over two years later, it's an understatement to say that China has made phenomenal progress with its e-CNY, which is currently being used in tests by more than 140 million Chinese, if we're to believe the figures revealed by the Chinese authorities. One should always take the figures reported by China with a grain of salt.
However, China is ahead of the rest of the world on its path to cashlessness with its e-CNY . Xi Jinping wants to have the first place advantage in central bank digital currencies (CBDC) . This is for two reasons:
- The first is homemade. e-CNY is the last missing piece of the puzzle presented by China's social credit system, which is supposed to enable the imposition of a society of seamless mass surveillance on the Chinese population.
- The second is external. China wants to become the first world power in the future before America. To do this, Xi Jinping has realized that it is necessary to attack the dominance of the US dollar over the world. This gives America an excessive privilege which China and other countries like Russia are no longer willing to pay .
All countries will follow China's lead by creating their own CBDCs
Well aware of the risk of leaving China alone in the field of CBDC in a future world where everything will be digital, many other countries have already decided to embark on the adventure. With considerable delay of course. China has the advantage of being able to move forward on strategic projects faster than democracies due to its closed system.
Among the countries that have already announced their intentions to introduce their own CBDCs, we find Japan, Sweden and the European Union. After all, all countries will get to it sooner or later. When a trend emerges, all countries jump on it for fear of being left behind.
Hesitant so far, the Fed will eventually show up. Jerome Biden's second term appointment of Lael Brainard to his second term is a clear sign that the Fed will change its vision for the creation of a digital dollar in the coming months .
All these countries will enter this area, first of all, in order not to become obsolete. Second, these countries will also find an advantage in terms of surveillance. These democracies criticize the Chinese system, but they will not hesitate to monitor even more closely all the financial transactions of their citizens. Finally, the governments and central bankers of these countries sincerely believe that people have chosen Bitcoin simply because of the lack of fiat currency alternatives.
Once CBDCs are up and running, they hope Bitcoin will be left behind.
Governments think CBDCs will push people away from Bitcoin, but they are wrong
As Indonesia plans to launch a digital rupiah in the future, Bank Indonesia Deputy Governor Judah Agung just explained that it will be a great tool to fight Bitcoin:
“CBDC would be one of the tools to fight Bitcoin and cryptocurrencies. We think people will find CBDC more reliable than Bitcoin. The CBDC will be part of efforts to combat the use of cryptocurrency in financial transactions.
After reading this statement by Judah Agung, I wonder if politicians and central bankers are gullible or playing a game pretending to understand why people have embraced Bitcoin since its inception.
If the CBDC war is going to happen, Bitcoin has already won the battle . What Bitcoin offers is unique. CBDCs will only be an extension of the disadvantages of fiat currencies to the digital world. With the added major drawback of posing massive privacy risks.
Bitcoin protects you from the ravages of monetary inflation in a censorship-resistant way. CBDCs will never be able to offer you that. Bitcoin currently has just over 130 million users. This means that the vast majority of Earth's inhabitants have yet to discover the digital scarcity invented by Bitcoin.
When that happens, and it will, the demand for Bitcoin will explode. It cannot be otherwise. When presented with two solutions, you will inevitably choose the one that offers you the most protection and privacy guarantees. Governments and central bankers will have to get used to the fact that Bitcoin is here to stay.