National digital currencies: causes and prospects

On the eve of the G20 summit, where issues related to government regulation of cryptocurrencies will be discussed, we are trying to understand one of the ways of government influence - “national cryptocurrencies”

If previously the terms of crypto-economics required the help of Google to be understood, then recently the concepts and events around the cryptocurrency world have become firmly established not only in the headlines of news sites, but also in the everyday life of ordinary people. Sometimes they become the subject of jokes and anecdotes:

- Dad, give me Bitcoin for my birthday!

- Bitcoin... it's too expensive, son... why do you need ten thousand dollars?

- Dad, please give me... I really need nine thousand eight hundred dollars for my birthday!

- Although... five thousand nine hundred and ten dollars is not so much! Okay, I’ll give it to my son!

- Hurray! They will give me fifteen grand for my birthday!!!

Very soon they will definitely say: “Bayan! Anecdote with a beard! Now it’s already worth thirty thousand.”

This suggests that cryptocurrency has gradually entered our world. It is beginning to have a noticeable impact on the world economy, and this influence is constantly growing every day. Many countries already understand that cryptocurrency in the future will become not just a means of payment, but “the lifeblood of the world economy.” Indirect confirmation of this is the statements of different states about the creation of a “national cryptocurrency.”

Let’s try to figure out what concept states mean by the term “national cryptocurrency” and what tasks it should perform?

Venezuela is one of the first countries in the world to announce the creation of a national cryptocurrency El Petro. Since there is hyperinflation in the country, the rate of the national cryptocurrency is tied to the cost of a barrel of oil. In connection with the financial blockade and economic collapse, hopes are pinned on El Petro to attract investment into the country and overcome the crisis. 

Iran - hopes for a national cryptocurrency that would help resolve issues with the potential threat of sanctions from the United States and financial isolation from the largest international payment systems SWIFT, VISA and Master Card. The cryptocurrency issued by the Central Bank of Iran would be regulated by Tehran and compliance with all Islamic canons.

Great Britain, Israel, Japan and China plan to introduce a national cryptocurrency, which will be strictly tied to the exchange rate of the pound, shekel, yen and yuan, respectively. According to the governments, the issue of cryptocurrency should be carried out by the central bank and strictly regulated. The goal is to reduce the amount of cash, take control of illegal transactions, identify the payer and beneficiary of the cryptocurrency transactions.

Similar goals are pursued by Belarus and Estonia, launching Thaler and EstCoin. These cryptocurrencies will serve to attract investments and are regulated by the state. It is believed that state control will make investments reliable and safe.

Turkey expects to create TurkCoin, which will serve as a reserve fund, which includes state-owned companies. will serve as financing for state-owned enterprises included in this fund.

March 26, 2018, Hungary plans to launch the Korona cryptocurrency, which will be based on blockchain technology and use a special software platform of the Swiss bank. Korona is intended for fast. and cheap cross-border transfers, as well as for the most profitable purchases in a specialized online store from sellers from all over the world.

For what purpose are national digital currencies created?

If we analyze what goals states pursue by participating in the “crypto-mining” of the coins they have invented, then the idea of total control in a decentralized one runs through the red thread. network makes it possible to manage quasi-cryptocurrency, identifying each user of the network. This opens state access to any confidential information, which is not available in the Bitcoin network and in almost any other cryptocurrency network.

Why China, a country that has exhausted all possibilities for regulating the cryptocurrency market, suddenly decided to introduce a national cryptocurrency? Because in the process of fighting and banning cryptocurrency exchanges and ICOs, it became clear: only what depends on the state can be regulated. It is possible to ban Chinese stock brokers, but with the current level of globalization and the development of information technology, Chinese brokers very quickly change their country of registration and become Singapore or Korean exchanges, continuing their work. Only in this case does capital begin flow to other countries, causing even greater economic damage to China.

Using the example of China, many countries have concluded that the only way to overcome cryptocurrency is to use a national cryptocurrency to create powerful competition for it and lead the ranking of cryptocurrencies. Moreover, it is necessary to create a cryptocurrency that would surpass the capabilities of any independent decentralized cryptocurrency, but which could be easily regulated.

In this case, the saying “if you can’t prevent it” disgrace - lead it!" is more relevant than ever.

To some extent, the idea deserves attention, because modern cryptocurrencies still have quite a lot of shortcomings, and there is something to work on. But sooner or later, all these problems will be solved.

Take, for example, such a property of cryptocurrency as volatility. High volatility of the exchange rate makes it inconvenient, sometimes even unprofitable and economically unfeasible widespread use of cryptocurrency in everyday life.

And a strict link to the fiat exchange rate or to a commodity asset in the form of oil and gold makes state-owned cryptocurrencies low-volatility. Undoubtedly, this provides a certain advantage for their use as a means of payment when paying for goods and services or paying salaries.

However, the current high volatility will not always be characteristic of the cryptocurrency market. It will take time before the cryptocurrency rate reaches certain equilibrium levels. values. The cryptocurrency market should grow and stabilize, and then its volatility will be comparable to Forex or stock markets...   

But national cryptocurrencies have one drawback that cannot be eliminated.

No matter how convenient and reliable a national cryptocurrency is to use, it has one key property - it is not independent of the state. It is independence that is the most valuable property of a true cryptocurrency! Only independence can outweigh any other benefits from its use, such as speed and low cost of transactions, reliability and profitability of investments. 

This does not mean that all national cryptocurrencies are doomed to failure. It is quite possible that some of them, with the most liberal regulatory rules, will gain very wide popularity and will be successful for certain, very specific purposes. But they will never be able to become universal, because they will always depend on the state.