Even if you are not a cryptocurrency fan yourself, you have to admit that it is fascinating to watch how governments are approaching everything from central-bank digital currencies (CBDCs) to privately developed cryptocurrencies and stablecoins. Even government's reaction to blockchain is fascinating if you dig deeply enough. Some regulators are for it, others are against. Some haven't played their cards one way or the other.

The one thing they all have in common is a lack of knowledge. Central-bank leaders and bureaucrats alike still do not know what to make of the whole crypto and blockchain thing. It seems many of them are grasping at straws trying to figure out if, when, and how to regulate. That is not necessarily a bad thing. The longer governments delay getting their hands into the pie, the better for the crypto community.

In this post you will read about three stories that should interest you as a cryptocurrency user. They illustrate, yet again, both the possibilities and pitfalls of cryptocurrency and blockchain in the hands of government regulators. The first story comes from Switzerland while the remaining two are from China.

1. Switzerland nixes a CDBC

Considered one of the most cryptocurrency-friendly countries in the world, Switzerland has welcomed nearly everything crypto for years. They were one of the first countries to announce research into creating a CDBC to someday replace the franc as a day-to-day consumer currency. That plan appears to be dead, at least for now.

In a mid-December (2019) press release issued by the Swiss government's Federal Council, regulators made it clear that they intend to put plans for a CDBC on hold. They will continue researching the possibility of issuing a digital currency but, for now, any such plans are theoretical only. There is no timetable for when developers might come up with a prototype they could reasonably test.

Unable to meet expectations

So what's the deal? Apparently, the Federal Council spent some time studying the viability of a digital franc and ultimately determined that it would not meet expectations. Furthermore, the Council believes that a Swiss CDBC would not, at least at this time, benefit Switzerland in any way. Yet it would create new risk to the nation's financial stability.

Swiss regulators appear to be concerned about how a CDBC would impact monetary policy, payment efficiency, and consumer expectations. They also seem to feel that further development of a CDBC should be limited to coming up with a platform exclusively for financial institutions and those that support them.

The Council's report seems to suggest that the future CDBC would not be accessible by average consumers. Banks, credit card companies, payment networks, and investment houses would have access to a digital franc and the network behind it, but consumers would not be able to use it for day-to-day purchases. Whether or not consumers would be able to invest in a CDBC is not clear.

At any rate, what once looked promising in Switzerland now seems to have been put on the back burner. However, there is a silver lining. The Federal Council is on record as saying it fully supports the development of private cryptocurrencies and stablecoins. In other words, while they do not see a need for a government-issued digital currency to replace the franc, they are on board with helping private projects succeed.

2. Replacing SWIFT and CHIPS

Speaking of CDBCs, China appears to have beaten everyone else to the punch. The test release of their CDBC, known as Digital Currency Electronic Payment (DCEP) was just days away at the time of this writing. Four of the nation's largest commercial banks will join with three telecom companies to begin roll-out of the CDBC in a small number of Chinese cities.

Each bank and telecom will have the opportunity to devise its own testing program as it sees fit. It is expected that a successful test will lead the People's Bank of China to eventually expand the CDBC nationwide for both commercial and consumer use. Having said all of that, it is old news. The real story comes from Huang Qifan, Vice Chairman of the Chinese Center for International Economic Exchanges.

According to him, one of China's goals from DCEP is to eventually replace SWIFT and CHIPS on the world stage. SWIFT is a worldwide, international financial network used by commercial and retail financial institutions to process transactions. It is both standardized and reliable, having been in operation since 1973.

As for CHIPS, it is a private clearinghouse for commercial transactions owned and operated by U.S. interests. It is the single largest U.S. network for high-volume domestic and international payments. Its major advantage is that it is owned entirely by the private institutions that fund it.

Between the two of them, SWIFT and CHIPS essentially dominate financial institution transactions around the world. China wants to change that. They claim that both networks are outdated, too slow, and too expensive to continue operating. They also claim that the U.S. uses the two systems to manipulate global economics.

China has already made it clear they want DCEP to eventually replace the U.S. dollar as the world's preferred reserve currency. When you combine that goal with a companion goal of replacing SWIFT and CHIPS, it becomes clear that China wants to dominate global economics.

Motivated by Libra

China's desire to be a dominant global player is nothing new. As such, it is rather curious to see them go all out on a CDBC after waffling for so long. Throughout 2019 the world could never be sure what China was going to do. First regulators said they wanted a CDBC, then they said they didn't. First they said it would be ready by the end of the year, then they said there was no timetable.

Something lit a fire under the boardroom table at the People's Bank of China. That something may have been Facebook's Libra announcement in June 2019. China may be genuinely scared that Libra will take such a prominent role in global finances that it would negate the influence afforded the People's Bank of China. As such, they are rushing to get their CDBC out first.

The good news is that it is highly unlikely DCEP will replace either the U.S. dollar as the world reserve or the SWIFT and CHIPS networks. The rest of the world is smart enough to know that anything China is against is good for the rest of the world. It is highly unlikely that Western nations would abandon the current system in favor of DCEP.

3. Blockchain courts trying cases

Our other story out of China actually has little to do with cryptocurrency per se. Rather, it is all about blockchain. Apparently, the Chinese government has leveraged blockchain technology to streamline its court system. More than 3 million cases in active litigation were settled through a blockchain system between March and October of 2019. That is a lot of cases.

China created the first blockchain-based 'internet court' back in 2017 in Hangzhou. Things went well enough there that the national court system expanded the program to Beijing and Guangzhou in April 2019. It is probably only a matter of time before the system is used nationwide.

How does it work? Litigants utilize internet-connected computers to open up their cases. They use the same systems to enter evidence, file motions, make pleas, etc. The system analyzes legal texts, past cases, and a mountain of additional data to artificially weigh evidence and render a verdict.

Efficiency is the priority

Chinese officials have made it clear that the blockchain court system is all about efficiency. In fact, Beijing Internet Court president Zhang Wen made it clear earlier in 2019 that efficiency takes priority over accuracy in the court system. That doesn't sound very promising to the accused, but there is a safety net in place for the time being.

The system currently renders verdicts that are then sent to a human judge for review. That judge ultimately makes a legally binding ruling based on his or her review of the blockchain information. It is assumed that litigants on both sides have a reasonable opportunity to contest the blockchain ruling.

There are reasons to believe that this safety net will not be enforced permanently. First, China's Supreme Court has already ruled that evidence authenticated by the internet system is legally binding. Second, Wen has said that the system he oversees is heading in the direction of eventually replacing human judges altogether.

Would you be comfortable being tried by an artificially intelligent blockchain court system over the internet? It would be a hard pill to swallow for a lot of people. As flawed as humans are, it is still possible for us to inject rationality and compassion into the court system. Machines are incapable of that.

Both blockchain and cryptocurrency continue to stir the pot worldwide. It is evident that neither of the technologies are the passing fads many thought they would be. Both are here to stay. Furthermore, both will have a very definite impact on how we live our lives in the future.