China's digital Yuan has nothing to do with Cryptocurrency

China’s digital Yuan has nothing to do with Cryptocurrency


China’s digital yuan, DCEP (Digital Currency Electronic Payment), is out of the testing phase and ready for full integration across the country. But the fact that the name of money contains the word “digital” does not mean that it is a form of cryptocurrency. No. It is nothing but a state currency with a different delivery system.

New control method

Do not think that this type of virtual money has at least something in common with cryptocurrencies. This yuan is not stored in the public ledger. It is controlled centrally by the Chinese authorities and can be changed if political whims require it.

DCEP is not a peer-to-peer currency, but requires the use of an officially regulated financial intermediary. It does not have a market valuation independent of the old version – money. They are linked together. It lacks an algorithmic protocol that dictates the production of new assets, not to mention an end date by which no more will be created. These are funds with a discretionary money supply controlled by the state.

This asset enables the use of an innovative method of population surveillance, creating new data that can be tracked by the authorities. In BTC, there is a pseudonymous protection of user privacy.

The value of Bitcoin and other uncensored, decentralized cryptocurrencies was largely based on the relationship between the distribution of new monetary units and the computing power required to conduct transactions.

DCEP be better called a pseudo crypto

The claim that a DCEP issued by a central bank will reduce certain transaction costs and be less error-prone. But at what cost? Other claims, such as that they will necessarily lower real interest rates, depend critically on how the digital currency in question is structured and the purposes for which it is used. (One should also be suspicious of the statement by ceteris paribus that a reduction in interest rates is necessarily a positive result and does not depend much on the context.)

In short, everything that makes Bitcoin what it is is missing from this thing. Bitcoin has become a fantastic discovery in the modern era, as it has demonstrated that government is not necessary for the existence of money. It does not need an issuing authority or a technocratic administration.

Governments that are now trying to create their own cryptocurrency are simply eager to plunge into one of the greatest creations of our era, even if they avoid everything that made Bitcoin and other coins so great. Now the market itself is able to decide. In the long run, the market will choose friends over enemies.