By Amie Parnaby

Several countries have expressed an interest and a determination to create their own state-backed currency using the blockchain (distributed ledger tech) phenomenon. Other countries have stated that it’s just not feasible. There are arguments on both sides of the coin.

For those of a pro-crypto attitude and enthusiasm, the idea of a state-backed cryptocurrency is a slap in the face to the very concept and ideology of the Bitcoin development. The idea of having a centralised cryptocurrency is just a pointed attempt to regain control of the financial ecosystem that blockchain and its younger siblings are trying to replace.

It may just be a coincidence that the countries that are implementing or looking to implement their own state-backed cryptocurrency, such as Venezuela, Russia, China, Cambodia, Iran and Turkey, are less-than-liberal in their approach to their people, and monetary control is as good as any other control mechanism. Everyone needs money to live.

Countries such as Venezuela and Russia have made no secret of the fact that creating their own state cryptocurrency serves as a mechanism to circumvent Western sanctions.

Other countries are trying to improve or save their failing national currencies or want to join the global financial market, such as Cambodia. No one can blame them for that.

Some just like the idea of DLT and want to go cashless, like Sweden, whose central bank has embraced the idea. It’s these countries that could eventually lead the way to global cryptocurrency adoption.

So far it just seems like a power grab by governments and central banks.

Without the foundations of DLT, Cryptocurrency would subside into digital fiat

State-backed crypto would remove the foundations upon which cryptocurrency has been built

Anonymity – Okay, they aren’t all anonymous, and people are eventually traceable through their transactions. However, right now the only thing that needs to be recorded in a transaction is the wallet address. Existing banking institutions wouldn’t allow that to continue.

Decentralisation – If a cryptocurrency is state-backed you can be sure that it will be a centralised system. Not only because they would never yield control over the blockchain to anyone but their power-base, but also because they wouldn’t want anyone else to be able to read it.

Transparency – If everything is recorded on the blockchain to be read, governments and departments would have to be completely transparent in all dealing. I strongly doubt that any government in the world can claim utter transparency when dealing with its population.

Immutability – There have already been suggestions and consultations with organisations such as Ripple Labs about creating an ‘alterable’ blockchain, citing it as a possible way to encourage banks and other financial institutions to embrace the Blockchain.

These foundations are what made cryptocurrency the popular alternative to fiat currency. At present, everyone in the world uses fiat currency to do everything, and most would probably be happy to move to DLT fiat currency. It wouldn’t mean much change and they could go on with their lives until the next financial upheaval makes them re-examine their financial freedom.

And then there is the competition

We mustn’t forget about the competition; it’s already here.

By the time any or all countries have developed their state cryptocurrency, the existing crypto coins will have developed far in advance. While nations build their infrastructures to accommodate blockchain finances, the existing ones will be improving.

The irony that can’t fail to be noticed is that while governments sing the praises of the blockchain and what it will do for the national economy, all the while denigrating other cryptocurrencies, they will be sowing the seeds of their own destruction.

The fact is that by maintaining authority and power, centralised institutions are ‘pushing’ DLT as a state-backed answer to the current cryptocurrency popularity.

You want distributed ledger; you can have it but on OUR terms.

What isn’t clearly understood is that once this state-backed child of the blockchain exists, it will be easier to phase it out and use the old one that is far better advanced and suited to the purpose. They will have built the infrastructure and paved the way for cryptocurrency adoption, only to have it wiped away by the old ones that were built to last.

About the Author:

Amie Parnaby is a professional writer and her experience spans a broad range of industries, from I.T. to training and optics to banking. Currently, Amie is the content writer for Terrexa – your entry point for crypto.