China is cracking down on cryptocurrency. But that’s not because he doesn’t like the idea of ââa fully digital economy.
The ruling Communist Party of China (CCP) State Council has ordered a halt to bitcoin trading and mining. And all thanks to its excellent digital firewall.
Beijing has long sought to isolate its population from the rest of the world. Foreign media are strictly controlled. Its Internet access is severely limited. Most western social media such as Twitter is illegal.
But the emerging trend towards digital currencies had seemed to him to be quite his ally.
It turns out that is too much.
The basic concept of cryptocurrencies – the blockchain code – makes it possible to record the transaction history of each âdigital coinâ. This is how such insubstantial currencies establish their authenticity and trust.
But it can also be a powerful weapon of surveillance.
âIn theory, after the digital yuan is launched, there won’t be any transactions that regulators can’t see – cash flows will be fully traceable,â said Xu Yuan, analyst at the Financial Research Center. Peking University Digital. Morning Message from South China.
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China switches to crypto
A major CCP financial regulator issued a new ruling on Friday. He claims that cryptocurrencies “seriously undermine the security of people’s property and disrupt the normal economic and financial order.”
This is why, he says, he wants to protect Chinese investors from the dangers of highly volatile virtual currencies. State media reported that money laundering, smuggling, gambling, drug trafficking and the black market were among the council’s concerns.
Beijing therefore ordered the cessation of virtual currency exchanges in savings products and commercial transactions of banks. He also threw the full weight of China’s huge economy behind the efforts of the People’s Bank of China (PBOC) to establish its Digital Currency / Electronic Payment System (DCEP) – also known as the Digital Yuan.
While monetary policy and law enforcement are the cited reason for this move, a recent report by think tank CNAS states that such traceable currency “will arm Chinese economic planners with a range of data that no other government has never been able to bring together effectively â. .
He also points out that “senior Chinese government officials have emphasized the value of DCEP as a tool for enforcing party discipline.”
But reigning in the foreign crypto-economy will not be easy.
And that will have international spinoffs.
Unofficial estimates indicate that up to 70% of the total value of all virtual currencies is “mined” in China. This means that more computer processing power is committed there to generate new digital “parts” than anywhere else in the world.
This is why speculation about a Beijing ban sent shock waves through the global trade network last week.
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Earlier this year, CNAS warned that Beijing’s push for a new digital currency “would likely allow the Chinese Communist Party (CCP) to strengthen its digital authoritarianism domestically and export its influence and standards abroad.”
Last week, digital asset analyst Boris Schlossberg of FX Strategy released a statement warning investors that Beijing’s drive to limit cryptocurrencies operating within its borders to the Digital Yuan was an exercise in ” absolute power”.
Such technology would allow it to monitor and analyze the wealth of its citizens, he says.
âThe digital yuan is both programmable and traceable, which gives the Chinese government enormous control over the economy,â he says. “Not only will Chinese policymakers know about all of the consumer choices made in the economy, but they could also directly affect spending behavior by making the currency expable on a certain date.”
CNAS says the People’s Bank of China says it will see all transactions take place as they occur. “(This) will allow the CCP to exercise greater control over private transactions, as well as to exercise punitive power over Chinese citizens in tandem with the social credit system.”
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Behind this decision is the insecurity of Beijing’s authoritarian one-party government and its desire to detect “outliers” among its citizens.
In other words, those who do not conform to the CCP’s definitions of “normal” behavior.
When combined with biometric smart cards and a ubiquitous facial recognition surveillance network, Beijing will be able to compile extremely detailed individual profiles that can be monitored by artificial intelligence systems.
And these can be used to identify crime, terrorist threats, âdeviant behaviorâ and political dissidents.
CNAS has urged international governments and financial institutions to respond to the threat to privacy posed by the widespread use of cryptocurrencies.
Nations must “adapt to the rapidly changing payments space, understand the geopolitical implications of this technology, influence its development, counter DCEP threats to political and economic freedom, and ensure that innovation in this technology financial technology does not promote China’s digital authoritarianism, âhe said.
Jamie Seidel is a freelance writer | @JamieSeidel