Big Brother is Watching

On today’s show we’re talking about government playing a central role in monitoring every single financial transaction in a nation. Crypto-currency has been hailed as a way to break free from the chains of government based fiat currency. So far, many nations have not weighed in on crypto-currency. The two best known forms of crypto-currency are Bitcoin and Etherium. But in truth there are several thousand such currencies in existence. They vary in their features and functionality.

Governments are clearly afraid of losing monetary control over their economies. They are not about to surrender control of the money supply to a merry band of independent software programmers. I expect we’re going to see governments start to implement their own version of a crypto currency in order to sell the benefits of crypto to the general public. The first country to start the rollout of a digital currency is China with the digital Yuan. So far, the country has the currency undergoing limited trials.

Benefits that some users report include the convenience of paying with their smart phone. This is similar to the convenience of paying with something like Apple Pay on your phone. But in this case, there is no middle-man, and there are no transaction fees that are typically associated with digital wallets.

Digital wallets like Ali-pay or Tencent’s WeChat Pay have received wide adoption in China with over 700 million users of these systems today. Both companies are required to share transaction information with the central government if requested.

Right now, the central bank has the a trial with about 700,000 users participating in a trial. The central bank has said that they intend to protect privacy. This means that privacy may exist horizontally. If you buy groceries at the store, the grocer won’t have any information about your identity. But vertically the government has full visibility of all of your transactions and funds.

Now I’m not a huge conspiracy theorist. But the fact is, giving government full oversight over every single transaction in the economy represents a massive invasion of privacy.

In case you think this is only happening in China, think again.

The president of the Federal Reserve Bank of Cleveland made comments last September at the Chicago Payments Symposium conference. In her speech, she outlined a number of initiatives underway at the Federal Reserve.

Legislation has been proposed that each American has an account at the Fed in which digital dollars could be deposited, as liabilities of the Federal Reserve Banks, which could be used for emergency payments.

Other proposals would create a new payments instrument, digital cash, which would be just like the physical currency issued by central banks today, but in a digital form and, potentially, without the anonymity of physical currency.

The Indian crypto community is closely watching whether the Indian Federal government will ban cryptocurrencies, including bitcoin.

The latest information regarding the Indian crypto ban comes from Reuters which reported Sunday night that “India will propose a law banning cryptocurrencies, fining anyone trading in the country or even holding such digital assets.”

If you’re keeping you cash in your own Digital wallet that is located on your phone, what happens to all the bank deposits? If there are no bank deposits, how is the bank going to have sufficient funds to lend money out? Of course they don’t have enough money now. They only keep 10% of the loans on their books in deposit reserves now, and in some countries in Europe, only 3%.