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US intelligence is looking at Chinese CBDC as a national security threat

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2 months ago

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The U.S. national security apparatus is warning other agencies about China’s coming digital currency. 

On Wednesday, news outlet the Washington Examiner reported on a letter that National Intelligence Director John Ratcliffe had send Securities and Exchange Commission Chairman Jay Clayton earlier in the month.

According to the report, Ratcliffe offered to have staff brief Clayton on the security issues that derive from China’s dominance in crypto mining as well as the country’s progress in digitizing the yuan. Ratcliffe’s letter also apparently pushed Clayton to ensure that U.S. crypto firms remain competitive.

Cointelegraph has reported extensively on the race for a central bank digital currency, or CBDC. Among major economies, China seems to be closest to launch. 

Since Bretton Woods in 1944, the U.S. has enjoyed a privileged status as the issuer of the world’s reserve currency, the U.S. dollar. To this day, almost all international trade is settled in dollars, though that is changing for countries like Russia and China, which are subject to extensive U.S. sanctions.

The dollar’s special status affords the Federal Reserve extra flexibility in printing more dollars without running into hyperinflation, as there is huge demand beyond U.S. shores. It is also this special status that allows U.S. sanctions to be such useful instruments of international influence.

A successful digital yuan could challenge the status of the dollar in international trade. The flip side, however, is that many see a digital yuan as a tool of surveillance for the Chinese Communist Party. While that might reduce demand, that upgraded access to information may be another factor that Ratcliffe is worried about. 



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Regulation

cryptocurrencies of today are destined to fail long term

Published

5 hours ago

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January 26, 2021

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Bank of England Governor Andrew Bailey thinks it is unlikely that the current generation of crypto assets lack the design and structure needed to ensure long term regulatory survival.

Speaking during the World Economic Forum’s Jan. 25 online panel “Resetting Digital Currencies” Bailey responded to a question on whether cryptocurrencies are here to stay for the long term with skepticism:

“Are crypto-currencies here to stay? Digital innovation in payments – yes. Have we landed on what I would call the design, governance and arrangements for a lasting digital currency? No, I don’t think we’re there yet […] I don’t think cryptocurrencies as originally formulated are it.

Bailey indicated the levels of transactional privacy afforded by crypto assets is a source of concern among regulators, asserting the establishment “a privacy standard for transactions” is in the public interest.

“The whole question of a privacy standard for transactions made in any form of digital currency, and where the public interest lies […] this is a big one that is coming on to the landscape,” he said.

Bailey also extended his concerns regarding privacy to stablecoins, stating:

“The whole question of people having assurance that their payments will be made in something with stable value […] ultimately links back to what we call fiat currency, which has a link to the state.”

However, not everyone at the BoE is alarmed by cryptocurrencies. In November, Andy Haldane, BoE chief economist and a sitting member of the Monetary Policy Committee, stated that crypto assets may be a key component of a ‘new monetary order’.

The Bank of England is among many central banks researching the development of its own fiat-backed digital currency, alongside the European Central Bank and more recently the Reserve Bank of India