Everyone outside the country is expecting the arrival of China’s new sovereign digital currency. President Xi has recently been singing the praises of blockchain technology, the infrastructure for the new money.
But how the story of China’s blockchain plays out is likely to depend on internal political struggles, says Scott Weatherill, our guest on the latest episode of the New Money Review podcast.
According to Weatherill, chief risk manager, Japan for cryptocurrency market maker B2C2, the version that’s about to be introduced for China’s 1.4 billion people should be seen as part of a new anti-corruption drive by Xi.
That’s because the new blockchain will enable the state to supervise every single financial transaction in the country.
“This is all coming from Xi’s push to enact very difficult reforms that are going to cost a lot of elites in China a lot of money,” Weatherill says.
Beijing knows what it has to do to rebalance the economy, says our interviewee—it needs to move the country away from too heavy a reliance on investment and get ballooning internal debts under control.
The central authorities might also reap a political dividend.
“The idea is transfer wealth from local governments and local elites back to blue collar workers and the poorest people,” Weatherill says.
But Xi is facing political obstacles.
“Why can’t they do it? Because there are vested interests throughout the various layers in the state-owned enterprises in China’s state capitalist system,” Weatherill says.
The discussion then moves on to cryptocurrencies’ role in helping capital move out of China, bitcoin’s liquidity and market prospects for 2020.
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