Digital yuan threatens global freedom

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“[Bitcoin] is a way out of tyranny and nothing less than freedom money. “Alex Gladstein, Human Rights Foundation

The world is recognizing the emerging utility of Bitcoin and other cryptocurrencies. In the last ten years, crypto has evolved from the bizarre cypherpunk toy to global acceptance as a store of value, unit of account and medium of exchange. Less well known is its service as a dissident lifeline. Authoritarian regimes are predictable despise it. Instead, these governments cooperate with almost everyone else, develop substitutes called Central Bank Digital Currencies (CBDC).

The upcoming official crypto is nowhere more threatening than in China. With its massive population, its economic power, its technical know-how and its penchant for social control, China poses a legitimate threat to global freedom via its digital yuan or digital currency / electronic payments (DCEP). Prohibit cash and enforce DCEP as the only medium of exchange. More worrying is the goal of exporting its model worldwide through international standardization bodies. If successful, China will thwart the cryptocurrency promise of an individually empowered world. The United States should lobby global financial authorities to ensure that China’s digital tyranny remains domesticated.

China’s digital money journey

China jumped on the digital money train early on. In 2014 it founded the Institute for Digital Currency Research (DCRI), a branch of their central bank, the People’s Bank of China (PBOC). Last year the company started testing DCEP in four cities and plans to synchronize a nationwide rollout with the Beijing Winter Olympics next year. It is also expanded cross-border pilots after a successful test with the Hong Kong Monetary Authority.

Allegedly, China’s digital currency burden is superfluous. One billion Chinese are already doing electronic transactions. Digital transactions jumped 50 percent from 2018 to 2019 from 220 billion to 331 billion. The local retail giants WeChat Pay and AliPay habeny Exceed volume Visa and Mastercard.

The leaders of the Chinese Communist Party (CCP) envy this success of the private sector. The party’s DCEP goals are to regain dominance of the payment system and leverage private innovations. If his goals ended there, it would be an unfortunate but domestic affair. But Chinese goals go much further.

DCEP is a stepping stone to nothing less than total financial population control and the global adoption of the DCEP system by the central banking system. If Bitcoin is freedom money, DCEP is digital tyranny.

China works as Social credit system this gives local (and ultimately central government) functionaries opportunities to turn dissidents into non-persons because of real or imagined crimes. The Supreme Court of China placed Journalist Liu Hu on “List of Dishonest Persons Subject to Enforcement”. That meant he couldn’t fly, travel by rail, buy real estate, or borrow money. Inner Mongolia officials threatened the jobs and benefits of parents who protested the lack of Mongolian language classes. Police broke into homes and forced demonstrators to sign pledges of obedience. The ones who refused were subject Arrest and lifelong surveillance.

The near-secure integration of the DCEP data into the social credit system will combine financial authoritarianism with existing political oppression. Chinese officials who do not care about the sensitivity of Western public relations openly admit it. Former DCRI chief wrote in a 2018 paper that DCEP would “cut down intermediary links in the currency business. … [thus] offers a new way of economic control. ”This includes the possibility of supposedly subversives to withdraw funds immediately and to carry out transactions.

Party supporters to introduce Using DCEP to “enforce party discipline”. A January 2021 article by the aptly named Central Commission for Discipline Inspection specified that DCEP would be used to thwart bribery, fraud and “other crimes that cannot be tolerated”. Currently in one country Commit genocide, these statements should give cause for concern. As authors from the start influential report from the Center for a New American Security State (CNAS):

The [DCEP] The technical architecture will enable real-time or near real-time financial monitoring of all user transactions, which is currently not feasible by any country in today’s global banking system. DCEP is not just a technical experiment. It is a giant leap for the CCP’s control and influence in Chinese society.

From Satoshi Nakamoto to Digital 1984

Satoshi Nakamoto’s Bitcoin vision of a peer-to-peer payment system was aimed at eliminating trustworthy intermediaries. Since its world changing White Paper 2008 2008, innovators have made breakthroughs in terms of anonymity, programmability, and speed. DCEP takes Satoshi’s individual idea and creates something digital 1984. DCEP eschews distributed ledger technology or blockchain to verify transactions and distribute power. Instead, the PBOC reviews and monitors every transaction. As a Citi report explained:

At the heart of DCEP is its registration center which is managed by the PBOC in a centralized approach without the need for a blockchain consensus mechanism, so it can be more efficient.

Citi promotes “regulatory transparency” and “risk control” as advantages of DCEP over cash. The report further explains:

Each DCEP token has a standardized structure that contains information about user ID, transaction value, issuer, owner, etc. The information is updated with every transaction and stored in a centralized registration center managed by the PBOC. Hence, the PBOC would only need to extract information on a DCEP token to keep track of all underlying transactions. … DCEP will also solve difficulties in tracking cash transactions as the PBOC could easily extract transaction details of each DCEP payment from the central data repository and authorization point (to find out the true identity of the payer / payee).

According to Yaya J. Fanusie, Co-author of the CNAS report“Anyone who uses a digital yuan leaves their financial privacy pretty much directly to the Chinese government.” It doesn’t stop there. Extractable metadata extractable could pursue Movement of people and devices.

Money laundering and other financial crime can decline. And, as Citi has praised, the CCP will undoubtedly benefit from the efficiency, transparency and risk control of DCEP. But these virtues come with appalling compromises. It is complete real-time control of a population unprecedented in history.

China’s global ambitions

The PBOC is committed to exporting its CBDC model worldwide. This process would include acceptance by the Bank for International Settlements (BIS). Known as Bank for central banks, the BIS sets international currency standards. It is keen to avoid CBDC competition from private alternatives as it is readily admits. To do this, she understands the need to coordinate and set standards. Anyway, it recognizes that a collaboration of this magnitude will not be easy:

[A] single [internationally coordinated] The CBDC system raises a number of policy issues for central banks. The (joint) management of the set of rules and governance arrangements for the common system will be only one aspect. The wider implications of issuing a CBDC for monetary policy, financial stability and payments policy must be worked through for each central bank, which may require tradeoffs in the final design. Central banks, for example, have to check whether they are willing to cede some system control and monitoring functions to an operator for whom the governance arrangements would have to be (jointly) agreed. Negotiating these compromises between multiple central banks will be a challenge.

China sees opportunities in this troubled region. Chinese officials say privacy as it is now understood is out of date. It should be reinterpreted in “controlled anonymity“- that is, the parties involved can hide from each other, but never from the state. As Mu Changchun, current director of DCRI, recently noticed In a BIS speech, the BIS must weigh privacy against an “international consensus” on risk control. He further explained that the movements of the CBDC funds should be “synchronized” to help regulators “monitor transactions for compliance”. In other words, “controlled anonymity” for everyone.

The world is currently at a crossroads. While dissidents hacking themselves under authoritarian regimes use crypto to avoid persecution, China seeks to create a hegemonic financial system that oversees everyone. His growing economic power combined with his status as an early mover gives him a tremendous impact on the development of the CBDC landscape. The USA and the West must vigorously oppose this model not only out of economic self-interest, but also for the future of mankind.

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