Link: https://www.cnbc.com/2019/09/13/chinas-new-cryptocurrency-and-yuan-rmb-internationalization.html
China has just announced a proposal to release a cryptocurrency, basically an online version of their paper money, the yuan. This is a very interesting tactic by the Chinese government, as in the past they have been said to have been trying to make the yuan a more international currency, and maybe even a reserve currency. A reserve currency is one in which most of the international foreign reserves are held in that given currency, which has been primarily the US dollar for a significant amount of time. Besides increasing the international use of the yuan, this also has benefits for China in their quest to cut down on money laundering and corruption, as this would make it easier to track where money is flowing, and between whom. This of course has many implications on privacy, which will, without a doubt, cause a scandal at some point. That being said, having a cryptocurrency seems like it could potentially be the way of the future, with several large entities, such as Facebook, also announcing plans to roll out a new currency. This ties in very well to what we are talking about in class regarding money supply, and it begs the question, how will governments be able to control money supply if third party entities start creating new cryptocurrencies? And will these new currencies make the physical dollar obsolete?
I think it's safe to say that the dollar isn't going to become obsolete anytime soon. That being said, in this age of digitalization its not surprising that money is also transforming. Although cryptocurrency increases transparency, I wonder how it fares out in security? Since this industry is for the most part unregulated it only compromises security with more and more cryptocurrencies being introduced.
ReplyDeleteI think it is a possibility in the future to see the US move down a similar route as China is doing. The Fed could create a crypto-currency based around the dollar. Having a crypto-currency that they control would be desirable. I think this would happen long before some independent cyrpto-currency replaced the need for the dollar.
ReplyDeleteI agree that the dollar isn't going to become obsolete, that being said there are many problems with cryptocurrency such as the stability of it, the easy access to mine your own cryptocurrency, and how since it is digital you are subject to bugs, crashes, virus's and hackers. I don't think this is a smart thing for China to do and hopefully the U.S will not follow in their footsteps.
ReplyDeleteAs others have said, I do not believe that the US dollar will become obsolete. I believe that cryptocurrency will continue to thrive in the market and it would not shock me to see the US to move to cryptocurrency. With third parties being involved, I wonder if the US will move to cryptocurrency because then it raises the problem that the Federal Reserve cannot simply claim the rights to control cryptocurrency. I wonder how this will play out, and how long it will take (and if ever) to switch to cryptocurrency. Interesting article.
ReplyDeleteWhat's also interesting is that the IRS said they don't consider a cryptocurrency as a legal currency in the US. But I wonder if the US could ever adopt a cryptocurrency to be used for other important reasons like paying off taxes or loans. This is definitely an interesting topic to be discussed by the US government in the future.
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