China’s central bank is making a lot of noise about cracking down on bitcoin just weeks after the president of China hailed the blockchain.
This apparent difference between lawmakers and central banks is a new revelation of sorts for the millennial generation regarding our governance system.
You see, whether in China, in America or anywhere else, the central bank is “independent.”
Independent of who is the obvious question, with the answer being nothing else than independent of the people. Then who do they answer to?
Presumably their boss is Agustín Guillermo Carstens (pictured left), the general manager of the Bank of International Settlements (BIS). BIS is summarized as:
“An international financial institution owned by central banks which ‘fosters international monetary and financial cooperation and serves as a bank for central banks’.
The BIS carries out its work through its meetings, programmes and through the Basel Process – hosting international groups pursuing global financial stability and facilitating their interaction.
It also provides banking services, but only to central banks and other international organizations. It is based in Basel, Switzerland, with representative offices in Hong Kong and Mexico City.”
An official of the South African central bank let it slip last year during a public demonstration of a blockchain project that central bankers had been discussing bitcoin at BIS in such detail that they had decided even such mundane things like what to call cryptos, crypto-assets not cryptocurrencies.
Before PBOC revived front and center its digital currency plan, Carstens told FT that global central banks may have to issue their own digital currencies sooner than expected primarily because of Libra.
As the job of BIS is to coordinate between central banks, then presumably they have a division of labour setup where to not replicate work one bank, for example, does this digital currency stuff and then shares it with others.
There are a few banks ostensibly working on a crypto-like currency, but PBOC was first and thus is presumably the furthest towards potentially implementing it.
PBOC was also the first to enact something very strange. The central bank apparently has the power to issue diktats where monetary matters are concerned.
It is by this PBOC diktat that they closed crypto exchanges, not by any law. The ostensible recent “crackdown” is also from PBOC, not the Chinese government. Local media reports according to a rough translation:
“On November 22nd, the Shanghai Headquarters of the People’s Bank of China published an article entitled ‘Intensifying Supervision and Control to Fight Virtual Currency Transactions’…
Continuous monitoring of the virtual currency business activities within the jurisdiction, once found to be disposed of immediately, play early and small, prevent problems before they happen.”
The second paragraph obviously means continue to monitor and catch them while they’re small, with some fraud related projects apparently being made an example.
Now this says Shenzhen law enforcement, but whose orders are they following? Presumably those of the central bank, in which case, constitutionally or where legitimacy is concerned is in many ways shocking that the central bank has such power.
That it does is obvious because the Indian central bank did the same. In China you can say they’re authoritarian and it’s a bit difficult to discern who is responsible for what, but India is a democracy, with their system being similar to ours.
The Indian central bank too issued a diktat, and shortly after police seized a bitcoin ATM and arrested the operator, with the operator saying the police was under the impression bitcoin was illegal.
The diktat of the Indian central bank is being challenged in court, but the case has been adjourned and adjourned endlessly.
The Indian parliament has passed no law in regards to bitcoin. There is one under consideration, but it has not passed. Thus where does the central bank get its authority from to make law?
That’s not clear, but what is clear is there are two governments: the elected one in democracies or the communist party in China, and the “independent” central bank which appears to be outside the jurisdiction of even the constitution.
You can argue of course they’re doing this with the implicit consent of the elected or the communist party, but the law is the law, applicable to all, and they seem to be outside it.
So what to make of that? Well, since the debt based monetary system is the same everywhere, then our own central banks have the same power as above. Before they can abuse it, there is a clear need to demand far more accountability and arguably a need to limit their power considerably.
The problem is the central banks “independence,” and thus their governing power outside of the constitution, is unquestionable currently for reasons no one can explain fully except to argue do we really want the elected to be in charge of money.
Well, yes. They in charge of war and peace itself, why shouldn’t they be in charge of money, or why shouldn’t there be some sort of jury that has to consent to political decisions by the central bank, like the bitcoin diktats.
Otherwise such diktats have no legitimacy. If parliament in India or China wants to pass a law, then fine that’s the system. But the central bank passing laws? Which bit of the Bar course taught anyone that?
Only parliament makes laws, and maybe the judiciary a bit when interpreting them, and the executive indirectly through proposing them. Which part of those three is the “independent” central bank that makes law by diktat?
Because the central bank is abusing its power, there’s most probably a mini power struggle going on in China because clearly it appears crypto exchanges and bitcoin commerce is being tolerated regardless of what PBOC keeps saying.
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