“Jiaozi” Modern Edition: Foreign media say China’s digital currency development history is worth learning

The Chilean American Economy website recently published an article titled “Are We Ready for Digital Currency?” The answer from China is yes,” the article analyzes the potential of China’s digital currency market from the perspective of an expert. The article is now excerpted as follows:

Can you imagine Marco Polo describing the virtual currency scene? In the 13th century, he had to explain to Europeans how the paper money invented in China worked. If today, Marco Polo might say that virtual currency is “an account unit or digital value, which is composed of a unique sequence of letters and numbers that constitute a currency unit. It has value only if individual users are willing to pay for it. Virtual currency can be exchanged electronically. It does not exist in physical form. Virtual currency is not issued by a single authority or organization, but is registered on a computer network in an encrypted manner.”

Schopenhauer put it well: “All truth goes through three stages: first, it is ridiculed. Second, it is strongly opposed. Third, it is considered obvious. ” So, in fact, this also happens. In the evolution of the monetary system. It is difficult for us to conceptually define what money is. Therefore, the history of currency development repeats itself again and again.

In one of the largest cryptocurrency markets-China, its central bank adopted a more radical stance in September this year. The relevant Chinese regulations pointed out that “transactions related to virtual currencies are illegal financial activities”, which seriously endanger people’s asset security. . China is one of the first countries to try to eliminate the use of cryptocurrency. As early as 2014, the People’s Bank of China prohibited entities in this country from owning websites that use Bitcoin as customers for transactions. This is the moment when virtual currency began to arouse the attention of relevant departments. In 2019, China announced the creation of a digital renminbi. According to media reports, since mid-2020, the Central Bank of China has begun conducting various tests on the digital renminbi. For example, the domestic payment test between Hong Kong and Mainland China started in June this year. In November of this year, China tested its central bank digital currency at the China International Import Expo in Shanghai. Thousands of domestic and foreign companies participated in the exhibition. In booths, restaurants (including Pizza Hut and KFC), food and souvenir vending machines, you can enjoy up to 50% discounts on goods purchased with this digital currency.

If we go back about 8 centuries ago, life seems a bit familiar. It is China that produced one of the foundations of the modern economy-legal paper money. Around 1000 AD, a promissory note (Jiaozi or exchangeable banknotes) system appeared in Sichuan, China, to solve the inconvenience caused by the transaction of coins made of iron (as a medium of exchange and representing a certain amount of gold and silver). This is because the use of gold and silver coins as a means of exchange was forbidden to ensure that they remain in the region.

According to writer Tim Harford, the promissory note system is based on the trust of the issuer and constitutes a market promise that can be passed on from person to person. We can say that the modern version of this system is a virtual currency, as defined by the European Central Bank (ECB) in 2012: ” an unregulated digital currency issued and controlled by its developer, and in a virtual currency It is used and accepted by members of the community. ” China’s “Jiaozi” fully realized the three functions described by the Financial Action Task Force (FATF) in the definition of virtual currency: “The digital representation of value can be Conduct digital transactions, and can be used as a means of exchange and/or a unit of account and/or a store of value, but it is not legal tender in any jurisdiction. No jurisdiction issues or guarantees virtual currency and passes The mutual agreement of its community performs the above-mentioned functions.”

The Chinese authorities soon sought ways to benefit from it. They started by regulating the popularity of these handovers, and then formulated rules on how to deal with these bills, and finally banned private handovers and took over the entire business. Doesn’t this remind you of the current Chinese government’s handling of cryptocurrency issues?

Initially, the official Jiaozi was successful in China-its value is even higher than iron coins because it has lower transportation costs and can be circulated in various regions and even abroad. But then the Chinese authorities turned to the statutory system and abandoned the practice of exchanging metal currencies for Jiaozi. Can you imagine this conceptual revolution of that era?

We can say that electronic currency is the modern version of Jiaozi. According to the definition of FATF, it is ” digital representation of legal tender used to transfer value denominated in legal tender electronically “, that is, a value that has the status of legal tender. Carrier. According to the Spanish Royal Academy, the term “statutory” means to approve or authorize something to take effect. In other words, our legal tender system is nothing more than a convention or ruling, supporting gold reserves of equivalent value at some point, but that is no longer the case today. Therefore, the systems created in fiat currencies around the world today are created by central banks, supported only by the promise of replacing old bills with new ones. In fact, in ancient China, temptation caused too many Jiaozi to be issued, which resulted in a price increase, which caused Jiaozi to be worth only 10% of its face value in the early 11th century, completely devalued and discredited.

You might tell me that this is not enough to assert that Bitcoin and other physically non-existent virtual currencies can replace legal tender, because there is at least one support-physical paper currency. In fact, the U.S. dollar is neither backed by gold nor is it always printed on paper. After the subprime financial crisis, the US Federal Reserve (Fed) created trillions of dollars to rescue the US economy and inject liquidity into the financial system. Most of them were not even printed, but in 100% digital form. It is input by a computer and has no value support, but is listed in something similar to a spreadsheet, and then used as currency. In fact, this is similar to today’s Bitcoin. Bitcoin is already the legal digital currency of El Salvador, and the Federal Reserve is also considering launching an encrypted digital version of the U.S. dollar.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/jiaozi-modern-edition-foreign-media-say-chinas-digital-currency-development-history-is-worth-learning/
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