- China’s PBoC issues an expiry date on Digital Yuan in a move to control cash flow.
- Decentralized digital assets like Bitcoin offer true freedom while CBDCs are just evolving as another form of ‘monetary slavery.’
The world’s second-largest economy China has been one of the forerunners in introducing a central bank digital currency (CBDC). However, China is planning to bring a new twist to its CBDC ambitions.
As per the latest reports, China’s native CBDC – Digital Yuan – will come with an expiry date. This means that the users of the Digital Yuan will be forced to spend in a certain timeframe without the option of saving.
The digital Yuan will be programmable so that the government can set the expiry date. Well, this is quite obscure and an unconventional monetary policy innovation also popular as a Gesell currency. This currency represents expiring money that gives governments a heightened degree of control over the money’s velocity.
DCEP is the digital version of the Chinese Yuan and also a legal tender of the country. It is pegged 1:1 with the Chinese national currency “RMB” and is not for speculation. Issued by the central bank – People’s Bank of China (PBoC) – the CBDC relies on a centralized system.
The PBoC issues Digital Yuan to commercial banks against the cash equivalent or the bank’s deposit to the central banks. Note that the official physical Yuan doesn’t have an expiry date. Thus, users might get an option to convert their Digital Yuan to physical ones if they weren’t to use it.
With this experiment, the PBoC seems to be willing to boost the usability of the Digital Yuan among the local people in China.
CBDCs are slavery, Bitcoin is freedom
Although central banks and other financial institutions worldwide have denounced cryptocurrencies over the past decade, they have no option but to accept the underlying blockchain technology. It is clear that blockchain offers tremendous benefits in terms of cross-border settlements over the existing systems.
As a result, central banks have been pushing to build their own blockchain-based digital currencies aka central bank digital currencies (CBDCs). However, these CBDCs are quite in the early stage of development and shall be entirely controlled by their respective central banks.
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It means that they don’t solve the underlying issue of centralization but rather exist as a sophisticated form of money. Moreover, central banks can anytime change their policies on the use of CBDCs anytime at their whims. Thus, we will always be at their mercy no matter what by using CBDCs.
On the other hand, absolutely decentralized cryptocurrencies like Bitcoin help to break free from the shackles of money ownership by banks. This is basically the reason behind the birth of Bitcoin and several decentralized digital assets that followed.