Page 1 of 2

China has been blamed for causing the latest decline of the Bitcoin. Interestingly, China is also the country that launched the digital renminbi, a currency that stands to change the nature of financial markets.

It is the year 2021 and China has launched the digital renminbi, creating the biggest digital currency backed by fiat money.

The technical infrastructure employed by the Chinese is now being adopted by emerging market nations and used to support their own currencies. It already helped North Korea circumvent U.S. sanctions and ready its nuclear missiles for launch. North American cities are under threat and the supremacy of the U.S. dollar is severely tested. The balance of power seems upset.

Preventing the Free Trade of Cryptos

So far, a fiction only. But one likely to cause headaches among representatives of the current superpower: recently, a group of U.S. politicians and security experts met at Harvard University for a «wargame», as «Coindesk» called it. The aim was to show was could happen if China were to assume the global lead in the new world of digital currencies.

At the moment, Bitcoin is the unofficial leader in this game. But the oldest and most broadly used cryptocurrency felt the emerging power of the Chinese in recent days. It dropped a tenth of its value within a day and fell briefly below $7,000. The currency plunged after the Chinese central bank announced that it will pursue relentlessly those 25,000 companies in the People's Republic that issue or trade tokens and coins. Digital exchange platforms were also raided by the government.

Developing the Blockchain

The move caught many supporters of the digital currency on the wrong foot. President Xi Jinping at the beginning of this month had said that China must take hold of its chance and build a leading position in the development of the Blockchain technology, which is the underlying force behind cryptocurrencies.

The commitment by the republic's president had prompted a rally of the cryptocurrencies as traders hoped for a thawing of attitudes in the huge market. Since 2017, Chinese banks have been banned from doing business with crypto exchanges. The government has also threatened to impose a ban on the mining of cryptocurrencies.

China's Answer to the Bitcoin

China's double role as future superpower in digital payments and diehard opponent of established cryptocurrencies – a conundrum recently explained by Chinese fintech entrepreneur Michael Sung in his blog entry. The expert for digital currencies will be one of the invited experts at the Crypto Finance Conference 2020 in St. Moritz in January.

The Chinese government is opposed to digital currencies for a number of reasons, Sung explained: the «international» projects abet capital export, they help criminals pursue their illegal activities and, first and foremost, are not under the control of the state.

Since 2014, China has been working on its answer to the phenomenon. Scientists are developing the so-called Digital Currency Electronic Payment (DCEP) under the supervision of the central bank. The People's Bank of China rose to become the most important holder of patents and licenses of Blockchain infrastructure.

A Bonus for China's Trading Partners