Ed Ludbrook, CEO, Dacxi
The crypto world has waited with baited-breath for the launching of the new Crypto-Yuan by the Chinese Government and a crew of the largest Chinese financial institutions. This is a game-changer. A catalyst for disruption of the global financial system that has already shaken, normally unshakeable, central bankers into action. Or at least into uncategoristic public statements of action. You should remember that central bankers have laughed at crypto for years.
Officially, the crypto-yuan was to be pioneered in one province of China in the 1st quarter of 2020. Given no announcements, one can only assume that it has been delayed like so many things are today. The question I would like to ponder is, given the global turmoil today, whether this currency will ever be launched and, if it does, what is the likely impact?
Let’s kill the first doubt immediately. The Chinese will launch its crypto-yuan. And soon.
The strategic necessity for China for the new form of digital currency is more important today than before the C-19 virus pandemic and the subsequent financial crisis. China wants a digital currency that allows for more effective payments which also breaks its global trading community away from the control of the US Dollar, i.e. US-controlled global financial system.
The global financial system was created based on the US dollar after World War II. It served the world perfectly as the US economy dominated world trade, the US dollar was rock solid and the price to the other economies was worth paying, and not negotiable.
From the 1990s, the rise of the European Union and the Asian economies, especially China, has meant that the global financial system is not fit for purpose as the US dollar is constantly devalued and the US economy is only on par with China and EU.
The EU is mature and struggling for growth thus it’s the Chinese who are determined to take action to restructure the global financial system and the only way to do this is to break the power of the US dollar and the US banks that control it. And the only way is a crypto-currency which disrupts the current system totally.
It makes sense for the Chinese government to simply delay the rollout by a few months until the global development of the pandemic is clear. Like all viruses, this one will eventually burn itself out in the major economies of Europe, America and Asia. And then the real damage, the economic damage, will be clear.
To try and save the current global system, governments have already announced they will use the currency printing presses. For the third time in 20 years, they will pump trillions of dollars of new cash into the market to try and pump up growth.
To the horror of economists, the US Reserve Bank, have been given the ability to print an ‘infinite’ amount of money.
The impact of this tidal wave of new money to stimulate economic activity and avoid a 1930s like global depression is unclear. Let’s hope it works, yet the chances of success in the medium term as low as the financial markets, especially in the USA, have been seriously inflated since post 9/11 disaster. The asset bubble has crippled the world’s immune response [in virus speak].
Personal debt is at record highs. Corporate debt is at record highs. Government debt is at record highs. And the mass of the economy cannot afford more debt serving. Like the debt-fuelled Latin-American boom on the 1970s, the world cannot afford more cash-driven debt. And unlike this time, the US dollar is not sitting on an all-powerful economy. This time, they are strategically weak, so it is a perfect time for the Chinese to launch a new powerful stable crypto currency.
Put your emotions aside for one moment and look what’s really happening. The Chinese were the first to experience the virus and now their economy is going back to work. If their people start working, earning and spending, the world’s economy will become reliant on them for the moment. What perfect time to launch a new global reserve currency for the world to trade with China? Especially Asia. Also, the energy countries like Russia, Middle East and Latin America who will be desperate to sell their energy and the US economy is no longer the biggest market as they are ‘energy independent’ due to fracking.
Whilst the USA is desperately pumping the dollar to safe its internal economy, the world economy has to suffer using the US dollar.
Thus, China launches a new way to transact. Crypto. Simpler. Faster. Cheaper. Without having to pay a usage tax to a US clearing bank purely for the right to use US dollars as you do today.
So, if China does not launch their new crypto-yuan soon I will be amazed. They can do it inoffensively to the rest of the world, in China. They pioneer the payment systems with the four major banks and three major payment systems already announced. And then, through Hong Kong, Taiwan and a host of other dominated economies across Asia and Africa promote its use. America and Europe will not even notice the change.
Then so ever gently, demand for the US dollar globally will decline.
Countries will not need to hold so much US debt as reserves so will reduce their US dollar holdings and reduce their buying just when the US government will desperately need to increase borrowing and out-of-control military spending. The value of the US dollar due to reduced demand and increased supply, must drop. This natural devaluation will be great for the US economy until the weakness of the US financial system is revealed.
Asia will not need the US dollar anymore. They will not need to raise global capital in US dollars so won’t need Wall Street banks or stock exchanges. Just as the world dumped British banks 100 years ago, the world will dump American banks. Asia will finally own its own economy rather than having US control. Singapore to become the new global financial centre rather than London.
Globally, the world will finally fall into the three regional spheres of power with its own dominant currency; Europe with its Euro, Americas with its dollar and Asia with its yuan. All three currencies will become crypto because this is the best digital currency technology.
And because they are crypto, they will be compared with the world’s independent crypto-currency, the Bitcoin. And as Bitcoin cannot be devalued by printing so the world will demand the end of economies pumped through money printing where the wealth is concentrated on a few leading capitalist organisations and individuals.
The final major impact will be the total disruption of the global banking system as crypto will allow for people to dump their own payments and banking solution if they have not embraced crypto. And the first crypto banking leaders will not be current crypto companies or digital banks rather it will be the four leading Chinese banks and three Chinese payments companies; WeChat pay, Alipay and UnionPay.
Their exclusive head start supporting the launch of the crypto-yuan means they are can dominate global change. They don’t need the USA and EU to win. All they have to do is lead Asia. And they will change at a speed that no American or US bank will comprehend.
The US and EU governments, with their banking cartels and media power, will do everything to influence and slow the expansion of the new crypto-yuan disruption. They have no power to do this. Like all digital disruption, the winners will be though that adapt fastest.
As I constantly preach ‘Crypto is Asian’, it is the key to the Asian [Chinese] 21st Century. In 50 years, the launch of the crypto-yuan will be seen as the point when everything changed.