Another central bank has officially stated that it intends to issue its own digital currency, based on blockchain. This time it’s Turkey.
According to the Anadolu agency, the plans are included in the country’s annual presidential programme and will be completed in 2020. The framework in which it is integrated includes the development of the Fintech ecosystem in Turkey and the creation of an economic technology park in Istanbul.
We are reminded that similar moves are being prepared or thought in particular by China, Canada and the ECB.
Mainly, for two reasons.
One is that the current monetary system has been designed in the past, under other circumstances and for another purpose. The second concerns competition between Countries. The competition has shifted from the field of war battles to the economy and technology.
This is why China and the EU have opened the pouch with millions and are funding innovative ideas based on blockchain. They consider it a cutting edge of technology that will put them in front of the competition race.
Is it in the interest of ordinary citizens that the study of CBS creates a national digital currency based on blockchain? If it’s good or bad, it’ll show the future. But what we know for sure now is that it is a powerful weapon, extremely dangerous, especially in authoritarian regimes.
Cryptocurrencies are not just digital currencies. If that were the case, there would be no need for this type of currency. E-Banking works fine. For example, 98.5% of the euro circulating in Greece is digital, according to data from the Bank of Greece. Only 1.5% is in the natural form of banknotes or coins. To see a list of hosting companies who accept bitcoin click here.
The comparative advantage of cryptocurrencies is that it is money with programming. What does that mean? That the currency itself is a tool, a surveillance platform.
Let us see what is happening in China, where we have more data:
Today more than 90% of daily transactions are done through smartphones, from applications like WeChat and AliPay of Alibaba. All of these transactions are recorded in a database. To learn the information the government wants, it is forced to cooperate with third parties, such as commercial banks and technology companies. With sophisticated digital Yuan, things are being simplified. The central bank itself will record in real time where it is, as well as its route.
If the government decides tomorrow to exploit the data and rule out a category of citizens who do not like their characteristics, for example if they are dissident. Even if they can’t make them disappear, the money will be able to be dissapeared, at the touch of a button. If there is no possibility of cash, exclusion from the system will be worse than seizures or imprisonment. When we say block, we mean complete. They won’t be able to buy a loaf of bread.
And not just that. There can be a premium system for obedient citizens. For instance, are you going to the party reunion? They grade your behaviour with a good degree. You gave up your neighbour? Even more so. So depending on the score you are collecting, you can get a discount on your home’s rent, reduced interest rate on your loan, increase in your salary, etc. It’s not about science fiction. What we are talking about is already being implemented in China, at an experimental stage.
As you understand, this almighty economic oversight is the dream of a dictator. Nothing to do with Bitcoin, which is open source, decentralized, censorship-resistant and protects the privacy of transactions. Unlike the Internet, which the Chinese authorities could easily manipulate and censor, they realised that they cannot effectively control transactions with Bitcoin. That is why they avoided the strict ban, which would create a huge black market witch people will use to transact and make money online – without the government to be able to interfere.
According to the leadership of the central Bank of China, the goal of digital Yuan is to completely replace the money supply. Replace all banknotes and coins with a digital version based on blockchain technology. Further objectives are its dissemination worldwide, to act as a means of circumvention sanctions from the US, to replace SWIFT as an existing global payment network. This is not a hidden plan, but for official published statements.