Will China’s State Cryptocurrency Create an Orwellian Future?

Many cryptocurrency libertarians share a common utopian view of future blockchain technology and bitcoin. Bitcoin idealists will ask questions such as, ‘is society ready for a blockchain – based world?’ The answer may very well be ‘no’. I believe that future technology and cryptocurrency will result in drastic changes in society going forward.

Often times, the libertarian/absolutist perspective preposes the idea in which cryptocurrency is the greatest threat posed to world governments. The primary conflict emerges when taxation is introduced into the situation. ‘How can a government tax income from a privacy coin such as Monero when the origin of the recipient and sender are unknown?’ It’s impossible.

If society knows it cannot be punished for not fully reporting its income tax, how many people will decide to obey the rules? Some may, but this idea has the potential to scare governments into banning cryptocurrency and forcing their citizens to use a nationalized digital currency.

In regards to the libertarian – utopian paradigm, all advanced technology has the potential to be used for bad or good. Cryptocurrency has the ability to preserve wealth due to the fact it cannot be confiscated by corrupt regimes. As a historical example, Jewish victims of the Nazi regime did not have the ability to preserve their wealth, and in turn it was unjustly stolen. For the first time in history, technology has found a way to protect citizens of the world from corrupt regimes. This is an incredibly positive use case for cryptocurrency, but governments could soon enforce nightmarish use cases for cryptocurrency. Governments could have the ability to enforce the use of their own national cryptocurrency. China has already banned non-state cryptocurrencies and is attempting to create a yuan-based cryptocurrency in order to protect the yuan from non-state digital currencies.

According to a March 28th announcement from the People’s Bank of China, “China is embracing an in-depth transformation, and will constantly improve the service entity economic level. The first is to further intensify reform and innovation, by solidly promoting the R&D of the central bank’s digital currency.”

China is developing a centralized cryptocurrency which is controlled entirely by their government. Currently, the US government or the NSA could track a person’s monetary activity if they exhausted enough resources. These resources would consist of the aggregation of credit card data and other metrics such as gathering subpoenas. Since data and credit card behavior are both somewhat difficult to track in the United States, privacy is mildly created through obscurity.

This concept of a centralized governmental digital currency is a very Orwellian view of the future. A centralized government cryptocurrency is terrifying, because the government has complete access to transactions on one centralized database. A government could also prohibit the use of cash and force citizens to only use their state digital currency. Therefore, if an oppressive regime wanted to they could seize a person’s capital at will, or simply delete a person’s digital currency. These concepts sound like science fiction, but in reality they are not out of the realm of possibility. A state cryptocurrency is a very desirable technology for current regimes because ‘why would a government use cash if it could enforce a digital currency which is completely transparent for tax and legal purposes?’

Governments around the world will continue to create centralized digital currencies. Centralized development has already begun in China and will probably be pursued in Russia or even in the UK. Fortunately, the hypothetical enforcement of a centralized government coin would only increase the demand for decentralized cryptocurrencies. Ultimately, privacy in an Orwellian future will be immensely valuable.

Disclaimer: I am not a financial advisor. This is not financial advice. Please do your research independently and make objective decisions. This article is intended to educate readers about potential centralized state cryptocurrencies. The author holds positions the cryptocurrencies mentioned in the article.