As Bitcoin Surges To Record High, China Prepares Its Own Digital Currency

Tyler Durden's picture

Submitted by Mike Shedlock via MishTalk.com,

Bitcoin hit an all-time high over $1200 today.

Traders are happy because the SEC is expected to rule on a Bitcoin ETF by March 11.

Meanwhile, Bloomberg reports China Is Developing its Own Digital Currency.
 

After assembling a research team in 2014, the People’s Bank of China has done trial runs of its prototype cryptocurrency. That’s taking it a step closer to becoming one of the first major central banks to issue digital money that can be used for anything from buying noodles to purchasing a car.

 

At the same time as it builds up its own capabilities, the PBOC is increasing scrutiny of bitcoin and other private digital tenders. It doesn’t want a bitcoin bubble to blow up. And since currencies have historically been issued by the state, not private players, it doesn’t want to cede the cryptocurrency space to companies it has no control over.

 

Chinese people have embraced online payments for just about everything. To buy a can of Coke, thirsty commuters scan QR codes on their smartphones rather than feed coins into a vending machine. At Lunar New Year gatherings, money is exchanged via a few presses on a smartphone instead of crisp notes handed over in red envelopes.

 

All of that poses a challenge to the PBOC’s status as the central bank of both the digital and physical realms. So if you can’t beat them, join them.

 

“Getting to know more precisely how much banks lend, where the money goes and the pace of credit creation is key to curbing money laundering and making monetary policy more effective,” said Duan Xinxing, vice president of Beijing-based OKCoin Co., one of the country’s biggest bitcoin exchanges. Issuing digital currency will make it easier for the PBOC to monitor risk in the financial system and track transactions economy-wide, he said.

 

OKCoin is among cryptocurrency exchanges that has recently taken steps to halt bitcoin withdrawals amid efforts to clamp down on capital outflows.

 

In January 2016, the PBOC said it will have its own cryptocurrency “soon,” but there has still been no formal start date announced. In the meantime, there’s been strong advocacy from senior officials, including Fan Yifei, one of the PBOC’s deputy governors.

 

“Cutting costs is an obvious benefit, but the impact of shifting to blockchain-based digital money from the current payment structure goes beyond that,” said Larry Cao, director of content at the CFA Institute in Hong Kong. “There’s a potential you can pay anybody in the system, any bank, and any merchant directly. Blockchain will change the whole infrastructure. This is revolutionary.”

 

Real-time data

For the PBOC, using blockchain, the technology that underpins the digital currency bitcoin, will allow it to trace transactions and collect “real-time, complete and authentic” data to compile precise monetary indicators such as money supply growth, OKCoin’s Duan said.

 

“The transparency of economic activities in every corner in the country will significantly improve,” Duan said. “The central bank will have unprecedented knowledge of how the economy runs.”

 

So instead of relying on monthly surveys of businesses, or collations of spending from the statistics authority, the PBOC and therefore the government would have real-time readings on the pulse of consumers. Policies could then be fine tuned on a day-to-day, even hour-to-hour basis, giving an unprecedented level of precision to monetary management.

Capital Flight

Bitcoin is a primary means of capital flight out of China. How long will that last?

Here’s one key thought on bitcoin from the article: “OKCoin is among cryptocurrency exchanges that has recently taken steps to halt bitcoin withdrawals amid efforts to clamp down on capital outflows.

When China launches its own cryptocurrency, will it ban Bitcoin transactions?

If so, what happens to the price of Bitcoin?

Contrary Indicators

The launch of a Bitcoin ETF reminds me of those waiting for the launch of JDSU Leap Options in 2000 so they could “load the boat”.

During the 1990s, JDS Uniphase stock was a high-flyer tech stock investor favorite. Its stock price doubled three times and three stock splits of 2:1 occurred roughly every 90 days during the last half of 1999 through early 2000, making millionaires of many employees who were stock option holders, and further enabling JDS Uniphase to go on an acquisition and merger binge. After the telecom downturn, JDS Uniphase announced in late July 2001 the largest (up to then) write-down of goodwill. Employment soon dropped as part of the Global Realignment Program from nearly 29,000 to approximately 5,300, many of its factories and facilities were closed around the world, and the stock price dropped from $153 per share to less than $2 per share.

Blockchain Technology

I like the blockchain technology behind digital currencies like Bitcoin. Blockchain is perfectly suited for recording mortgages, deeds, autos, etc.

Title insurance companies will cease to exist, at least as stand alone title companies.

Scalability  

Every transaction is recorded on the blockchain so the requirement of resources to process and store the information continually grows.

This poses a scalability issue for high volume transactions. Recording every payment would certainly constitute high volume.

Scalability Articles

  1. The Real Blockchain Scalability Challenge
  2. Waves Platform Implements New Blockchain Scalability Approaches
  3. Blockchain scalability

If blockchain can scale to the point where governments can ban cash and record every transaction, expect instant tax collection and loss of privacy.

Digital Downside 

  1. The government will know where every penny is at every second.
  2. The government will know every monetary transaction real time.
  3. You will no longer be able to give the babysitter, gardener, bartender, a friend, or anyone else an extra penny without the government knowing.
  4. Sales tax collection and VAT tax collection will be instantaneous.
  5. Governments can impose negative interest rates and other confiscation schemes at will.

If cash is banned, the blockchain will record every penny you spend, and who you gave it to.

Money laundering will become much more difficult, but the cost will be a loss of privacy, threats of negative interest rates, and other cash confiscation schemes.

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Dilluminati's picture

Anybody care to guess how crooked taht will be?

Trump was right in respect to masters of currency manipulation.

laughing just mine your own eh comrade?

It has to be bad when they stoop to this.

bwh1214's picture

Someone should have seen this coming a long time ago. Oh that's right it was shown in this video a long time ago. Must watch 'cause it's not just China the Fed is going to go this route as well! It's coming!

http://www.themonetaryreset.com/2016/04/e-dollar-concept-is-being-pursue...

Paper Boy's picture
Paper Boy (not verified) bwh1214 Feb 24, 2017 10:43 PM

Nationalist digital currencies are free to go up against teh mighty Bitcoin...  and they will lose.

BadDog's picture

Not only lose, but shamed.  Greshams law will kick in, and people will spend the bad bitcoin digits as fast as  they can.  But when the luxury items and other goods give a discount for bitcoin guess which will be used.  Besides, if governments want to start using digitial currencies they'll be training consumers for free about how Bitcoin works and then why use national crappy fractional reserve digitial currencey that will lose value, when the free range defaltionary currency which will only become more vauable in an inflationary environment is available.

Paper Boy's picture
Paper Boy (not verified) BadDog Feb 24, 2017 11:09 PM

Canaduh said it would have its own digital currency, the "Mint Chip" back in 2011...  still waiting.

Here's the deal, they want to make a Bitcoin killer but they are bound by their own red tape, laws and penchant urge to print and commit fraud.  And Bitcoin has first mover's advantage plus Bitcoin fights dirty.

limited man's picture
limited man (not verified) Paper Boy Feb 25, 2017 4:16 AM

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... http://bit.ly/2jdTzrM

USisCorrupt's picture

I'm with TRUMP !

China will realize that they will be unable to compete against Bitcoin and will soon embrace Bitcoin into their currency mix.

Watch & Learn.

Raffie's picture

What the PBOC is failing to understand that it is not just the digital currency, its that fact that its Btc is P2P where the Gooberment and Banks are not invited for obvious reasons.

Mustafa Kemal's picture

And of coure, the chinese know this, so they will use one currency for one thing and the other currency for quite the other.

mobius8curve's picture

What people are failing to see is that Bitcoin required the use of the internet and the governments own the gates and the pipeline. Why do we not know the actual inventor of bitcoin and the underlying block chain. Oh that's right because Satoshi is nothing more than a patsy because the NSA is intricately involved.

A crisis is coming that will force feed the destruction of all fiat currencies as the beast phases in the block chain technology where no one will be able to by or sell within 3 1/2 years of this currency crises. Remember India was a test run of peoples willingness to get along to go along.

Bitcoin was nothing more than a cute name that is riding atop this block chain till they get all the bugs worked out and of course peg all those nefarious little users who just might buck the system. It amazes me how much these rogue players underestimate the ability of the NSA to keep tabs on all those using bitcoin.

Just remember what was written 2000 years ago is transpiring right before our eyes and is mandated by a Father and no one will be able to escape this except through Christ:

Revelation 13:14-18 And he deceiveth them that dwell on the earth by reason of the signs which it was given him to do in the sight of the beast; saying to them that dwell on the earth, that they should make an image to the beast who hath the stroke of the sword and lived. (15) And it was given unto him to give breath to it, even to the image of the breast, that the image of the beast should both speak, and cause that as many as should not worship the image of the beast should be killed. (16) And he causeth all, the small and the great, and the rich and the poor, and the free and the bond, that there be given them a mark on their right hand, or upon their forehead; (17) and that no man should be able to buy or to sell, save he that hath the mark, even the name of the beast or the number of his name. (18) Here is wisdom. He that hath understanding, let him count the number of the beast; for it is the number of a man: and his number is Six hundred and sixty and six.

 

 

 

 

 

malek's picture

The Chinese are pikers compared to US currency manipulation especially since 1971.

kahplunk's picture

I know right little amateurs

ebworthen's picture

Get the frick out of Ethercoin and invest in physical in your possession Gold and Silver before it is too late!

Raffie's picture

Silver has more reasons to own it then gold and will have a much higher % profit gain then gold.

The central planners's picture

Silver is the most leveraged commodity with short paper contracts in the world. Its an accident waiting to happen.

Raffie's picture

Silver is CONSUMED in tech as well.

AE911Truth's picture

 

Silver will become too precious to trade as money, since it is essential to electricity production.

 

Gold will envy silver’s value.

  

bluskyes's picture

Nonsense, the both of you. Price will overcome silver supply problems. As prices rise, companies will begin mining landfill sites.

Txpl9421's picture

Funny you say that. The other day I was driving past our cities landfill. It's about 400 feet high. I told my wife, "I bet it you dug down about 100 feet you would find hundreds of thousands of dollars in silver coins that just got scooped up and tossed out--like pennies in a vacuum cleaner.

BustedBanksta's picture

Mining landfills?  Man, now THERE'S a job.  Where do I sign up? ;)

Paper Boy's picture
Paper Boy (not verified) ebworthen Feb 24, 2017 10:44 PM

I agree... eth is crap.  Buy Bitcoin instead.

Starvation 2017's picture

When will you guys learn?

You can own both "ethercoin" and metal at the same time, there's no rule against it. It's called "diversification", a novel concept I know.

Quantum Bunk's picture

Honestly this is bullshit. Everyone keeps trying to find reasons for x,y and z. Bitcoin is the premier medium for drug purchases online. Why cant that be the reason ?

Also. All capital flight can be supplimented with the 3 trillion in forex and a trillion in US dollar debt they have. They don't need those dollars. The EU is their biggest tarde partner. Not USSA.

China's problems are US dollar bearish. Thats a fact.

dumbhandle's picture

Bitcoin gets its value from vendor acceptance in the drug dark net markets (DNMs). Bitcoin is also trackable due to its open blockchain architecture. This means if you pay me in bitcoin, I know how much money Is in those feeder addresses and so on up the tree. I also know if you bought drugs if I knew the drug dealer's addresses, which does indeed happen. Bitcoin is ill suited for DNM use due to these serious privacy issues.

Since I know if your stash is tainted or not, Bitcoin  is not fungible. Want to pay me in coins related to DNM transactions and make your bad coins my problem?  No thanks.Your coins are worthless to me. The only reason it is used on the DNMs is its relative transactional and monetary immutability, which is a result of its gigantic miner base. Odsly enough, China is the dominant locale for mining. China has killed people for less.

Bitcoin also suffers from a fractious developer community. The core programming group has been co-opted by AXA and PWC. The result is transaction delays, high fees, and transactions drops.Bitcoin is on very thin ice due to low privacy, low fungibiloty, an unstable.mining base, network problems, and co-option by globalists.

Enter Monero (XMR). XMR's blockchain is private, which make it fungible. It stops others from knowing how much you have. It stops others from seeing your previous transactions.  XMR coins have no taint. XMR is not as immutable as the mighty Bitcoin, but has been practically immutable for a while. It is not co-opted. It's developer group is quick and cooperative.  And some DNMs are now accepting it.

What happens when interpol and FBI bust the DNMs again with bitcoin chainalysis providing key evidence? Worse for them, Bitcoin's blockchain implicates thousands of other parties. Will the DNM vendors then demand payment in Monero? Of course they will.

Some will say governments will squash Monero. They will certainly try. But Monero runs under the surface.  Hard to see and hard to track. It really is something new and different.  It is some kind of new and important invention that will change humanity soon.

nomofiat's picture

I really hope your monero crime coin takes over the DNM.

 

Bitcoin doesn't need that shady bussiness anymore. Soon the DNM will be priced out of the bitcoin blockchain because the fees are too damn high!

 

It's a blessing for bitcoin because this year Bitfury will announce that it's georgia land registry security project is backed by bitcoin for proof of immutability (pretty hard to do with monero;).

 

What do you think will happen to bitcoin's proposition as a store of value when people realize it is used to secure the property stock of entire nations? How will states ban bitcoin if other countries use it for such infrastructure critical security?

 

Bitcoin is only just beginning and no axa conspiracy dribble from alt pumpers like yourself can stop it now!

dumbhandle's picture

Ethereum is much much better suited for the scenarios you mentioned. Bitcoin has a lot of problems. After all, it is serial number one.  Bitcoin is losing market share rapidly.  Worst of all Bitcoin is controlled by globalist #1 AXA with its PWC henchmen. Bitcoin is a dystopian option.

dumbhandle's picture

WWhen people realize Bitcoin is not private, they will shun it.

http://www.b.dk/nationalt/bitcoins-sender-politiet-paa-sporet-af-150-mis...

The darknet markets have seen the article above and they are moving as quickly as possible to Monero.  Without the DNMs, there is no basis for bitcoin's value.  A land registry does not produce any demand for coins.

Txpl9421's picture

You really have to get off the crack pipe.

dumbhandle's picture

I was just about to say that about your mother.

Upset Your Worries's picture

@dumbhandle
...Enter Monero (XMR). XMR's blockchain is private, which make it fungible. It stops others from knowing how much you have. It stops others from seeing your previous transactions. XMR coins have no taint. XMR is not as immutable as the mighty Bitcoin, but has been practically immutable for a while. It is not co-opted. It's developer group is quick and cooperative. And some DNMs are now accepting it...

This thread (Re: What cryptocurrency is closest to my ideal? Monero?) on Bitcointalk might interest you:

https://bitcointalk.org/index.php?topic=1796575.msg17968724#msg17968724

I suggest keeping an eye on user "iamnotback" and his own crypto project.

SgtShaftoe's picture

Banning bitcoin will be about as successful as banning STDs and drugs. Good luck with that. There's always a way especially with the Internet and complex systems.

wulf's picture

Actually, banning bitcoin is very, very easy, since it relies on sheer computer power to ensure transaction authenticity. You don't really think that a handful of chinese miners and other individuals can compete with governments and large corporations such as google when it comes to computing infrastructure, don't you? Anyway, since the network itself is inneficient, allowing currently 6 transactions per second, one rich individual alone could fuck it up just by flooding the network.

Bitcoin will never be like gold or silver, it's just a distraction....

Olympus Mons is not a Volcano's picture

If flooding the network occurs do transaction get prioritized based on the transaction fee? Would higher transaction fee's compensate to a flood and what would be the cost to flood with an increasing transaction fee ignoring a potential unlimited supply of fiat currency to throw at it?

wulf's picture

As I said, rich individuals can flood the network rendering your precious coins useless. Higher fees wouldn't help since it only makes the miners (who could be the flooders themselves) richer, but it wouldn't increase the network capacity. Unless, of course, you increase the block size from 1 MB to something else. But, since the network is decentralized and anarchic by nature, it would take some time. Until then, bitcoin would lose credibility enough to return to its intrinsic value - zero.

Still, increasing the block size wouldn't solve the computer power issue, or "51% attack".

Frankly, personally i think not only bitcoin is fragile and a distraction, but a scheme to make retarded millenials destitute. The fact mainstream media (at least here in Brazil) not only praises it, but creates a hype around it, when they mention it, makes me very suspicious.

Golden Phoenix's picture

You're right, bitcoin isn't like gold and silver.

Demand for bitcoin has increased 50,000% in a few years.

 

dumbhandle's picture

You are talking about XMR.

dasein211's picture

No shit. No one will want an inflatable currency. They already don't want the yuan. No one will definitely want the digital yuan. If the Chinese can inflate it away it might as well be toilet paper. Bitcoin, Dash and Monero for the win.

kamikun's picture

Totally onboard with you about Dash... It's been a slow burn, but it's really starting to come into its own. (And profits are not a bad thing either.)

dumbhandle's picture

Dash is a kind of privately controlled corporation. It is fast, but immutability is on a thin edge.  Would not touch it.  Same for XRP.

Sword of Troy's picture

But what will the Chinese Digi Money be based on? Trust in the 20 central planners? The ability of the Red State to spy on all Digi Currency owners by way of Trojan horses? Blockchain technology? Or fair barter: Your real Yuan/hard currency for the new snowflake melting kind?

bluskyes's picture

Will it be open source, or the blockchain viewable/auditable by all? Or is it going to be microsoft's initial implementation of every product that they designed in house? A completely unscalable piece of shit.

 

I have a little bitcoin, but am not convinced of its scalability with commercially available computing technology

 

 

hotrod's picture

Crypto currency is the foundation of living in a Matrix world.  Who in the hell wants that?????

BadDog's picture

Bitcoin is becoming more anti-fragile by the day, week and year.  Beat it up, stomp on it, pour gaoline and light it...it will survive long afer the electronic digits that show up on our bank statements.  Make it illlegal!, yeah that's the ticket, that should do it.  LMAO.  It's not just the technology, which is great, it's not even about it offering a truly deflationary currency that can be scaled up during hyperinflation events.  It's about the first chance for regular humans to break the central banking matrix, which we want to do, at all costs.   I truly wish that I could get some of my good gold and silver friends to just take a look.  I love gold and silver, but bitcoin is the virius that will infect transactions in the future.  And once the system is infected ....well we'll leave it at that.  Old systems will fall, new ones will take their places.If you watching geopolitical, fiancne, religion ecd, you all see that the old order is ending.