As the tension between China and the U.S. is increasing, they might look to converge towards digital yuan and dollar and the role of cryptocurrencies. Central banks all around the world are trying to and understand digital currency variants. China and the United States are just the most important ones. The digital yuan, China’s DCEP, has been in the works for a while. While the Federal Reserve denies that an American variant is being actively developed, the Fed has already assessed the possibility and legistators in Congress from the Senate to the House have looked into creating a digital variant of the dollar and asked for testimony on the subject. It seems like we will hear more about digital dollar and digital yuan, and it is likely they would compete on a number of different dimensions. With the digitization of currencies, there will be some competition with cryptocurrencies. The role that cryptocurrencies play between a digital dollar and yuan is essential and it really matters to have cryptocurrencies around. This is just an extension of a monetary authority’s traditional authority over digital variants. They are used to feed money back and forth between retail banks and the central banking system. It replaces physical cash with digital variants. The vast majority of money supply in the world is already digital (90%+ or so). The central bank digital currencies propose to transform the most obvious variant that isn’t and which is closest to retail consumers rather than wholesale banks into a digital form. This simple transformation has a lot of complexities. It makes money and currency in the hands of consumers more changeable. It also makes payments more efficient between governments and people with less transaction costs. In addition, it surfaces a layer of data collection on a country’s people that has simply not existed before. With paper currency, it’s easy to make transactions in the economy that are very difficult to aggregate. With a digital system, it’s easy to create rich financial profiles and transactional flow This is why cryptocurrencies matter so much. Digital currencies controlled by governments will allow for granular control over people’s affairs and surveillance long before proper safeguards can be contested in the rule of law. Governments seem to offer less options when it comes to true self-custody. The United States and its allies, fought encryption strong enough to thwart its domestic intelligence agencies. To this day, the Attorney General of the United States wants to create backdoors in personal encryption. The state will always seek to consolidate more data in order to fight against its perceived offenses. This is true of the Chinese state or the American state. With the almost inevitable digitization of money around the world, it’s important that who you trust to control this data. The legal systems present within these large world powers and different levels of privacy according to our own discretion are two options.