Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

War on Cash: Chinese Digital Currency Gets a Boost

  by    0   2

Last summer, the Chinese government launched a pilot program for a digital version of the yuan. The virtual currency ups the ante in the war on cash and creates the potential for the government to track and even control consumer spending.

Last week, the digital yuan got a boost when China’s biggest online retailer announced it has developed the first virtual platform to accept the Chinese digital currency.

The digital currency is nothing more than a virtual banknote or coin that exists in a digital wallet on your smartphone instead of a billfold or a purse. The value of the digital currency is backed by the state, just like traditional fiat currency.

JD.com will accept the digital yuan as payment for some products in its online mall.

The Chinese government will give away digital yuan to citizens from Suzhou, a city near Shanghai. According to a post on the company website, the city government and the People’s Bank of China will issue 200 digital yuan “red envelopes” to 100,000 consumers selected in a “lucky lottery.”

This is the second such digital lottery run by the Chinese central bank. Earlier this year, the PBOC issued 10 million digital yuan to 50,000 randomly selected consumers in Shenzhen. The Chinese government also distributed digital yuan in the form of transport subsidies paid to individuals in Suzhou.

According to People’s Bank of China Governor Yi Gang, as of November, consumers had spent over 2 billion yuan in digital currency through some 4 million separate transactions.

Reuters called the digital yuan “one of the world’s most advanced ‘central bank digital currency’ initiatives, as authorities globally respond to threats from private currencies such as bitcoin and Facebook’s Libra.”

Proponents of government digital currencies tout their convenience and security. But as Seeking Alpha pointed out, there is a more sinister reason governments are scrambling to develop their own digital fiat.

If an official digital yuan was adopted, it would give Beijing a remarkable amount of information about what consumers are spending their money on.”

The government can easily track digital payments. As Bloomberg put it in an article published when the pilot program was launched, digital currency “offers China’s authorities a degree of control never possible with physical money.” Specifically, a digital currency might allow the Chinese government to more closely monitor mobile app purchases,  accounting for about 16% of the country’s GDP. Bloomberg describes just how much control a digital currency could give Chinese officials.

The PBOC has also indicated that it could put limits on the sizes of some transactions, or even require an appointment to make large ones. Some observers wonder whether payments could be linked to the emerging social-credit system, wherein citizens with exemplary behavior are ‘whitelisted’ for privileges, while those with criminal and other infractions find themselves left out. ‘China’s goal is not to make payments more convenient but to replace cash, so it can keep closer tabs on people than it already does,’ argues Aaron Brown, a crypto investor who writes for Bloomberg Opinion.”

This is part of the broader war on physical cash.

Governments around the world have quietly waged a war on cash for years. Back in 2017, the IMF published a creepy paper offering governments suggestions on how to move toward a cashless society even in the face of strong public opposition. Governments and central bankers claim moving toward a cashless society will help prevent crime and will boost convenience for the average citizen. But the real motivation behind the war on cash is control over you. We got a first-hand look at what happens when governments restrict access to cash when India plunged into a cash crisis after the country’s government enacted a policy of demonetization in November 2016.

It’s easy to shrug off China’s experimentation with digital currency as something going on “over there,” but US policymakers like the idea too. In fact, they have already toyed with the idea of a digital dollar. A Democratic proposal for stimulus payments in the wake of the coronavirus pandemic featured digital currency deposited into digital wallets. Some officials admitted it would potentially allow the government to control how the money was spent.

The bottom line is the tighter control governments have over money, the tighter control they have over you.

Get Peter Schiff’s key gold headlines in your inbox every week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!

Related Posts

Stagflation Warning: Atlanta Fed GDP Estimate at 0.5%

As governments shut down the economy in response to COVID-19 and the Federal Reserve put money printing into hyperdrive, we warned that it was a recipe for stagflation. Today, it looks like stagnation is here. Stagflation is an economic environment with rapidly rising prices, a weak labor market, and low GDP growth. It’s looking more […]

READ MORE →

Chinese Gold Demand Continues to Strengthen

Gold demand in China was up in September, as the country approaches a peak gold-buying season. Both gold withdrawals from the Shanghai Gold Exchange (SGE) in September and gold imports in August were up, a sign that the Chinese gold market continues to recover after it was hit hard by the coronavirus pandemic.

READ MORE →

JP Morgan Chase CEO Worried About Higher Than Expected Inflation

With CPI data once again coming in hotter than expected, it’s getting harder and harder for the mainstream to swallow the “transitory inflation” narrative. And some people are starting to worry. During an earnings call, JPMorgan Chase CEO Jamie Dimon expressed concerns about higher than expected and persistent inflation ahead.

READ MORE →

American Consumers Continue to Run up Credit Card Debt

Consumer borrowing has slowed somewhat from the record level we saw in June, but Americans continue to pile on the debt. Consumer debt grew by $14.4 billion in August to $4.35 trillion, according to the latest data from the Federal Reserve. That represents a 4% increase. This follows on the heels of a 4.8% increase in […]

READ MORE →

Demand for Silver in Electronics Sector Projected to Surge

The demand for silver is expected to expand along with the continued growth in global connectivity. According to a report released by the Silver Institute, silver demand in electronics and electrical applications is projected to rise by 10% by 2025.

READ MORE →

Comments are closed.

Call Now