by Peter Schiff, Schiff Gold: There has been a lot of talk lately about central banks implementing their own digital currencies. Why? As economist Daniel Lacalle notes, most transactions conducted using the world’s primary currencies are already electronic. In practice, the US dollar, the yen, the euro, the Swiss franc and the yuan already function as digital money. So why the rush to create new central bank digital currencies?
Simply put, this is another front in the war on cash.
And that means it’s about control.
As Lacalle put it, this is basically another step in the effort to gradually get rid of physical currencies “with an idea of strengthening control of the payments and make it simpler to trace the use of a particular means of payment.”
It’s also an effort to undercut the popularity of private digital currencies such as bitcoin.
A digital currency is nothing more than a virtual banknote or coin that exists in a digital wallet on your smartphone instead of a billfold or a purse. The value of the digital currency is backed by the state, just like traditional fiat currency. China has already rolled out a pilot program for a digital version of the yuan.
The government can easily track digital payments. As Bloomberg put it in an article highlighting the Chinese plan, digital currency “offers China’s authorities a degree of control never possible with physical money.” Specifically, a digital currency might allow the Chinese government to more closely monitor mobile app purchases, accounting for about 16% of the country’s GDP. And if they can monitor such purchases, they can also block them.
Government officials and central bankers sell digital currencies with promises of “efficiency” and claim it will improve the “transmission mechanism of monetary policy.”
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