We know a little more about the central bank’s digital currency in circulation in China. According to informed sources, the Chinese government will be able to set an expiration date for the digital Yuan. One of the purposes of this will be to better control the savings and transactions of citizens. This restriction on the digital Yuan reveals once again how different the CBDC is from decentralized digital currencies like Bitcoin.
Difficult to hold your digital Yuan indefinitely
Lately, several central banks have been developing a digital version of their governments’ official currencies. China is one of the forerunners of this wave of development of central bank digital currencies. This country is also a real case study revealing how dangerous this type of asset is for both economies and citizens’ freedoms.
According to Crypto News Flash, the Chinese central bank digital currency will have an expiration date. This means that users of the digital Yuan will be forced to spend their funds before the expiration date set by the government. If this is not done, users will simply lose their money.
This measure is a major obstacle for those who want to save in e-Yuan. However, it was introduced by the Chinese authorities on purpose. Indeed, this programming of an expiration date for CBDC funds gives the government a wide control over the transactions and savings of its citizens.
This is not the first time CBDC has been mentioned as a tool for citizen control. At the Central Bank Digital Currencies for Financial Inclusion: Risks and Rewards forum last October, Bo Li, Deputy Director of the International Monetary Fund, said that CBDC can help control how people use their money. He mentioned the example of China where CBDC is used to monitor financial transactions and determine eligibility for social credit in the country.
The CBDC, a danger to our economies and our freedoms
The Chinese government’s decision to impose an expiration date on its CBDC reveals just how far from the alternative to cryptocurrency these assets are as some states that are adopting it claim. Although CBDC is blockchain-based, its high degree of centralization makes it a constant danger to citizens. This is probably why some states are abandoning their plans to develop a CBDC.
Indeed, the CBDC is issued and controlled by the central bank. The price of the CBDC is exactly equivalent to the national currency of which it is just a digital version. This is the very first problem. Indeed, in countries where national currencies are hit hard by inflation, the value of the CBDC collapses with the value of the official currency.
Inflation is not a phenomenon that affects only poor countries. Today, rich countries are not immune. In this context, the crypto can be an alternative as in Latin America or Nigeria.
Moreover, CBDC represents a threat to privacy as well as to democracy. Andrés Arauz, former director general of the Central Bank of Ecuador, recognized this in August 2022 when talking about the digital Euro. Indeed, the fact that the authorities are aware of all the financial transactions of citizens and can even arrest them is a serious infringement of privacy and freedom. In less democratic states, this could lead to the easy identification of activists and opponents fleeing political repression. Thanks to its decentralization, crypto makes such infringements of personal freedom virtually impossible.
By setting an expiration date for the CBDC, China once again illustrates the danger of the CBDC. With its centralization, CBDC offers states the power to control their citizens’ finances as well as their freedoms. Fortunately, cryptocurrencies grant some alternative to these limitations of CBDC. Thanks to the decentralized and deflationary nature of Bitcoin, for example, this crypto is a powerful remedy against inflation in the long run and a powerful tool for the defense of human rights.
I dream of a world where every citizen has total control over themselves, including their finances. I believe that Bitcoin is one of the tools that will achieve this revolution. Since 2019, I am learning about this cryptocurrency and spreading the word around.