China's State Cryptocurrency Will Not be Decentralized

Neil Dennis

China announced that its state-backed, central bank issued digital currency (CBDC) won't be decentralized and will only partially use a distributed ledger, causing doubts over whether it can be classed as a cryptocurrency.

China's CBDC will be established through a two-tier system: it will be issued by the People's Bank of China (PBoC), while the country's commercial banks will provide the second-tier service of transmission through the financial system.

Mu Changchun, deputy director of the PBoC, revealed the launch of the digital offering at last weekend's China Finance 40 event. He said:

This two-tier system is suitable for our national conditions. It can use existing resources to support and develop commercial banks and smoothly promote digital currency.

Not a Cryptocurrency

The digital asset will not act as cryptocurrency such as bitcoin or ether, however, as China has already made it clear that transactions will be monitored.

This has led to much criticism from crypto-enthusiasts who have expressed their views on social media. On Reddit, Derricksaurus said:

Isn't cryptocurrency by nature decentralized? Isn't that the allure and value of crypto? By "developing systems" I am assuming they are meaning "we want to control it" then isn't that just what we call currency? Or at best digital currency?

Another Reddit user calling themselves boatsaregreat said:

My only guess is that they want to make people stop using decentralized cryptos and the easiest way is to lure them to their own.

Libra Causes a Stir

China's CBDC project has been expedited by the announcement in the spring this year that Facebook was looking to launch the Libra cryptocurrency next year. The response by several central banks has been similar to China's: launch a national cryptocurrency to challenge Libra before it gains traction.

Indeed, governments and central banks are not the only institutions concerned over the possibility of a non-governmental entity issuing its own form of currency. 

While governments are concerned about the possible impact on domestic currencies and central banks are worried about the implications for monetary policy - the commercial banking industry is perplexed about the possibility of its role in the financial system becoming diminished.

Nevertheless, China's broader aim for its cryptocurrency may be to help it circumvent some of the financial pressure it is coming under from US trade sanctions.

Argentina’s Smallest Currency Denomination Now Worth Only One Satoshi

Michael LaVere
  • Argentina's smallest currency denomination, the centavo, is now worth one satoshi.
  • The country is in the midst of a currency crisis, with the inflation rate reaching 50 percent. 

Argentina’s smallest unit of currency has slumped in value to now be worth the equivalent of one satoshi. 

The Centavo, which has been in circulation since 1854, has joined the Lebanese Lira and Vietnamese Dong in being the same value as the smallest denomination for bitcoin. 

The currency’s fall in value was noted by Argentinian Reddit user u/OneMoreJuan, who used the Centavo’s plight as an example to invest in bitcoin. Another user in the comments claimed that scrap material for the Centavo was now worth more than the coin itself.

Argentina is one of several South American countries to undergo hyperinflation and currency crisis in recent years, with the government defaulting on its loans a record nine times. The country entered its third year of recession prior to the start of the coronavirus pandemic, after undergoing an economic crisis that first began in 2018. 

According to a report by Bloomberg, Argentina’s inflation has outpaced expectations, with the current rate reaching roughly 50 percent. 

Argentinians have responded to the devalued fiat by turning to bitcoin and crypto-assets in droves. Data aggregator Coindance shows a significant spike in weekly LocalBitcoins volume for Argentinian customers since the start of the year, reaching as high as $70 million in May.

Featured Image Credit: Photo via Pixabay.com