This article attempts to examine how a national gold-backed redeemable blockchain digital currency could be implemented and what it might be like. Much of the information in this article will already be known to veteran gold investors, but retail investors that have recently been attracted to gold by the recent price rises will find it interesting.
This writer is not privy to the plans of the PBoC and therefore can only speculate on the matter. The US, which has the dominant global reserve currency and the most important Forex currency, as far as I know, has not announced plans to introduce a national blockchain digital currency. It does not need further discussion here to note that a digital currency can be blockchain as Bitcoin has shown that blockchain can be applied to a currency.
What is significant about Bitcoin is that it is a crypto-currency and can evade government supervision. The IRS cannot check on accounts without permission of the owner of the account. Bitcoin is therefore a useful tool for money laundering. A national digital currency with blockchain, on the other hand, would make it possible for the financial authorities of a country to check on all the purchases of all individuals. This is the sort of control that the CCP would like to have and explains the great interest of the PBoC in developing a national block chain digital currency. An app for smart phones could be prepared to make payments via cell phone with the new national blockchain digital currency possible.
Backed by Gold
When it is a question of how a national block chain digital currency can be backed by gold, one can only speculate on how this could be implemented. Given the huge amount of fiat currency in circulation, it seems impossible that any country could resort to making the currency redeemable in gold bullion. One possibility is simply that the country wants to have a large amount of gold in its reserves so that the digital currency gains credit.
With the gold price already at near $2,000.00 an ounce, there is simply no way that the amount of gold currently existing could cover the fiat money that has been issued. The USGS (United States Geological Survey) estimates that about 244,000 tons have been discovered to date with 187,000 tons produced and 57,000 tons in current underground reserves. Yearly gold production is between 2,500 to 3,000 tons. Most of this gold has been used for jewellery and industrial purposes. (How much gold has been found in the world?)