Are Digital Currencies the new Technological Power?
Money is more and more digital with the emergence of virtual banking, online payment and cryptocurrencies based on blockchain technology. Although Bitcoin may not become a global reserve currency, it has opened the box for digital currencies created by private organisations and central banks that will compete with the Dollar. History has shown that the US Dollar will eventually stop being the world’s reserve currency. More importantly, cryptocurrencies raise ethical questions about the control of the technology behind which will impact the worldwide economy as never before compared to the traditional fiat currencies.
The emergence of cryptocurrencies such as Bitcoin or Ethereum, and more recently, the launch of the project Libra proposed by Facebook, highlight the fact that technology is not neutral—it’s political and even geopolitical. As an example, Zuckerberg faces US Congress on Libra, privacy and more. As an argument, Facebook warns Washington that Beijing wins if Libra plan fails. Indeed, the People’s Bank of China races to launch its digital currency to accelerate the yuan’s use internationally. Moreover, the Chinese Communist Party is adopting a proactive approach since President Xi Jinping calls for blockchain development to gain technological power.
The challenges of digital currencies are related to payment before the replacement of the U.S dollar as the world’s reserve currency. It starts with the rise of stablecoins such as USDC or Libra, central bank digital currencies (CBDC) and a combination of both through synthetic CBDC model, which is a public-private partnership, with the rise of digital money. For example, AliPay and WeChat Pay are already required to back the money with the reserves of the People’s Bank of China. The Chinese central bank is about to increase its technological power with the launch of its digital currency in addition to the social credit system developed by the Chinese Communist Party.
This article is part of the Ethics of Fintech & Blockchain series