Will Blockchain Triumph in China?

Advisors from China’s central bank don’t believe bitcoin will turn into a legitimate national currency. Sheng Songcheng, a People’s Bank of China (PBoC) counselor doesn’t think bitcoin will be a real currency.

He told Chinese publication Yicai, that bitcoin was deflationary and thus would not be a proper modern currency. “Bitcoin is a string of code generated through a complex algorithm, and does not have inherent value,” Sheng was reported as saying.

Sheng is a professor at a Shanghai business school. He was quoted as adding, “If a country accepts one of them as its national currency, the entire national economy could collapse due to currency volatility.”

China is nonetheless building its own digital currency. The country opened an early trial of its currency on blockchain.

Jens Wiedmann, the president of Germany’s Bundesbank, has warned that digital currencies could potentially worsen financial crises in the future. He also stated, in his personal opinion, that ‘instant payments’ would put an end to the public interest in digital currencies like bitcoin.

Such statements are at least problematic. The fundamental reason is that central banking is an artificial process. The market itself should determine the value and volume of money. Central banking short circuits this functionality.

Central banks keep interest rates artificially low and over-produce money. This is what caused inflation. If the market were allowed to set the price of money, the value and volume would be rationalized by reality.

Ideally money gains slightly in value over time. It doesn’t lose, as it would with inflation. This means older people don’t go broke and die penniless. Generally speaking, money ought not to be manipulated.

As blockchain and cryptocurrencies evolve, the ones that match the market are the ones perhaps that will be the most valuable. This is in stark contrast to what people like Sheng are predicting. Time will tell.

blockcitynews.com