The latest fashionable fad is called CBDC (Central Bank Digital Currency). All the major central banks want to arm themselves with a digital currency and counter the pioneer in this area: China.
Antithesis of Bitcoin (BTC), the CBDC is a domestic tool of social control as well as a geopolitical tool for the internationalization of its currency.
Yuan vs Dollar
It has been several years now that the Chinese government is making no secret of its monetary ambitions. The Middle Kingdom openly defies American monetary hegemony and has been accumulating huge amounts of gold for years to guarantee its currency. This bulimia of yellow metal points to the restoration of the good old Gold Standard. In fact, the Chinese launched an oil index denominated in yuan and convertible into gold in Shanghai in 2018. The goal is to encourage the oil monarchies to stop accepting only the dollar and make room for the yuan.
The Shanghai Futures Exchange, where these oil futures are traded, also plans to trade rubber, non-ferrous metals and other commodities – all traded in yuan, of course. Beijing is determined to endow itself with the same exorbitant privilege that Uncle Sam enjoys, namely to pay for its raw materials in its own currency..
It has become popular in China to talk about monetary cold war. And like in the days of the real Cold War, combat does not take place on a battlefield. This latent war is global. It is what you might call a currency insurgency. The world’s largest economy (with purchasing power parity) is claiming its rightful place in the concert of nations given its new political and military weight. And like any insurgency, the tactics employed do not appeal to the guardians of the international monetary system and that famous SWIFT network which infiltrates all international transactions.
The digital yuan is not a cryptocurrency to speak of. It is not based on a blockchain and it is certainly not decentralized. It is in fact a vulgar Stablecoin capitalizing on a devious amalgamation with the Bitcoin.
Here’s how one of the governors of the Central Bank of China (PBOC) described it last month at the SWIFT network’s SIBOS conference:
” The PBOC sees the digital yuan as an important financial architecture for the future. […] It will replace the M0 money supply (coins, banknotes and central money) and its anonymity will be verifiable. ”
Fan Yi Fei
You will notice the use of the word “architecture” instead of “currency”. This description highlights the fact that the digital yuan is not really a new currency. He is mostly a payment system. This is how it is similar to Bitcoin which is a currency as well as a payment system in its own right. Two in one. However, the comparison ends there …
The purpose of this currency is certainly not to stop flushing the people with interest and inflation. No, the primary objective is to internationalize the yuan by bypassing the SWIFT network that the United States uses to place nations under embargo. For example Iran and its gigantic oil reserves that China needs to quench its insatiable thirst for energy.
As such, it will be interesting to note that even if Iran agrees to sell its oil in yuan (convertible into gold), the Central Bank of the Islamic Republic is also accumulating Bitcoin. Never put all your eggs in one basket …
Can we buy oil in CBDC?
The West derives much of its power from the international monetary system. The United States is living beyond its means thanks to the petrodollar. The fact that all the oil in the world is sold almost exclusively in dollars is to say in a sense that all the oil in the world belongs to them … All they need to do is print paper to secure the most formidable source of energy after the fission of uranium atoms. Convenient…
According to official Chinese figures for August 2020, 58% of its exports were denominated in dollars (compared to 66% a year earlier). Regarding the payment of its imports, China settled 51% of the total in dollars against 60% in 2019.
These figures show that China is still very dependent on the dollar, but also that it is loosening its ropes. The pledge to invest the equivalent of $ 400 billion in oil extraction and refining infrastructure in Iran, the heart of the new Silk Roads, is confirmation that the People’s Republic seeks to secure its energy supply without dollars.
Controlling the international monetary system amounts to controlling the world and especially its raw materials. It’s no coincidence that all wars are fought in the Middle East …
The ECB knows this well and it is for this reason that it recently asked the following question of the European crypto community:
Should the use of a digital euro be restricted outside the euro area, and if so, how?
ECB – source Bitcoin.fr
This quiz tells you everything you need to know about the CBDC war. The unacknowledged goal is not to let go of the international monetary system in favor of China.
Internationalization of the yuan
Although the yuan is the fifth largest international currency according to Swift, its market share was only 1.91% in August 2020. This figure is down from August 2018, suggesting that China is achieving an additional portion largest of its trade via its own international payment system, the CIPS.
However, the dollar still reigns supreme with a market share of 38.96%. Another example of US domination: the dollar constituted 61.26% of central bank reserves around the world in June. 20.27% for the Euro.
China is therefore present on all fronts in order to replace the dollar.. Gold Standard, CIPS, and now digital yuan allowing payments between two smartphones, without even needing the internet …
” We could solve the trilemma (low cost, low risk, high efficiency) of digital fiat currencies in collaboration with the private sector […] The PBOC governor said, signaling that his country will do without the Swift network if the United States maintains its embargo policy.
That being said, monetary domination is not primarily a technological problem. This is just one side of the Grail. Whether payments are made via the swift network or via a stablecoin (digital yuan), everything will depend on the willingness of the rest of the world to accept the yuan …
So we come back to the Iranian Gordian knot and its energy resources. Recall, for example, that the Eurozone failed to protect Sadam Hussein from the United States when Iraq decided to sell its oil in euros rather than dollars. What will the next President of the United States do?
Donald Trump refused to embark on a war against Iran brought to him on a set following attacks on refineries in Saudi Arabia and on a Japanese tanker in the Persian Gulf. But will he keep the same line if he is re-elected? And Biden, who has endured all US wars from Kosovo to Iraq, will he hesitate?
All this to say that if China manages to protect Iran, then the yuan can take off because no country dares to dump the dollar if China cannot protect it from the wrath of the United States.
One CBDC to rule them all
Beyond the fact that a CBDC can act as an international payment system, there is also the question of the end of cash …
” To protect the fiat currency of crypto assets and guarantee their monetary sovereignty, it is necessary that central banks digitize banknotes. “
Fan Yi Fei
This statement has the merit of being clear. One of the governors of the Chinese Central Bank believes that the Bitcoin is a threat and that it would take digitize fiat currency to protect against it…
As if you couldn’t already pay in yuan with a bank card … This filthy bad faith reveals that the other big goal of the CBDC is to make cash disappear. It is the dream of any authoritarian regime to have full control of the currency. Especially for China which, let us not forget, established theultimate social engineering tool, “social credit”.
This Orwellian system of rating citizens is intended to tame the population and deprive non-conformists of certain services. It is now enough to criticize the party on the internet to no longer have access to its savings.
But let’s face it, European totalitarianism also intends to do away with cash. And even if Christine Lagarde assures us that a European CBDC would not replace paper money, who tells us that the next president of the ECB will be of the same opinion?
End of cash rhymes with end of freedoms. We will be forced to behave like masked clones or we will lose access to our money for shorter or longer periods. In such a world, I let you imagine how successful Bitcoin will be …
Let’s finish by recalling the fundamental difference between a CBDC and Bitcoin: The money supply of the first is infinite while that of the other will never exceed 21 million units. Which one protects your savings from inflation?