As China’s debut of its digital currency draws to a close in tandem with the 2022 Winter Olympics, the regime’s crypto ambitions remain in place. Experts warned of the Chinese Communist Party’s centralized control, both at home and abroad.
A digital currency will empower the regime’s control over its populace, especially dissenters, as all future financial transactions would leave an easy-to-monitor, digital paper trail. The Olympic games may have functioned as a staging ground for foreign individuals from around the world to adopt China’s digital currency.
The country has been developing a digital form of its sovereign currency since 2014, issued by its central bank, the People’s Bank of China (PBOC). The goal is to replace physical banknotes and coins, which are, according to China analyst Anders Corr, “hard to surveil.”
“[Electronic payment] will make normal criminality, for example, drug and stolen good sales, more difficult,” Corr, principal at advisory firm Corr Analytics and author of “The Concentration of Power,” told The Epoch Times in an email.
“But it will also make any form of dissident activity, for example, the movement of refugees or the printing of dissident literature, harder to achieve, because there will be no cash economy, and therefore no cash to purchase related services,” Corr, also a contributor to The Epoch Times, added.
China unveiled the new electronic payment network in 2019 and began its trial in April 2020. Yet given the monopoly of the country’s third-party mobile payment providers—Alibaba’s Alipay and Tencent’s WeChat Pay—the PBOC is now pushing the boundaries of its digital yuan, or the e-CYN, to reach new clients.
The country recently launched a trial-run “e-CNY” app ahead of the Beijing Winter Olympics, paving the way for an international debut of its central bank digital currency.
Concerns
“By promoting e-CNY to an international audience,” said Corr, “Beijing is trying to socialize its currency as something new and innovative to encourage the global public to take it up.”The e-CNY’s push during the Games, however, has raised concerns over cyber security and data protection, as experts speculated it can be used to monitor personal data.
Last November, the PBOC claimed it collects information on a “minimum and necessary” basis in e-CNY applications, and strictly controls the storage and usage of personal information.
Some cautioned the digital system would feed China’s control over the flow and exchange of money, as authorities have the ability to monitor, freeze, and close accounts of citizens and private companies.
“The digitization of the RMB is precisely an anti-decentralization and anti-free money measure introduced by the Chinese Communist Party,” a mainland China Bitcoin researcher told The Epoch Times on Feb. 20.
Chinese people once relied on fully centralized currency in the form of grain‐ration coupons to buy rice, flour, cooking oil, and daily necessities amid the planned economy days under the Mao era. Such coupons issued from the 1950s—which strictly limited people’s choice of when, where, and what to purchase—were only abolished in the 1990s.
“Once the digital currency is implemented,” said the researcher, who preferred to remain anonymous due to security concerns, “[it will] only upgrade the control by coupons to currency. And people will bear no privacy.”
In a letter sent to President Joe Biden in January, Sen. Marco Rubio (R-Fla.) called the digital yuan a “tremendous security threat to individual users.” Sen. Pat Toomey (R-Pa.), via another letter sent a day before the Olympics’ official opening, asked the Treasury and State Departments to report on the total issuance of e-CNY during the Games and its adoption rate by foreigners.
Three GOP senators warned the U.S. Olympic Committee last July that Beijing’s surveillance may come “on an unprecedented scale” under the digital yuan, “with the hopes that [foreign visitors] will maintain digital yuan wallets on their smartphones and continue to use it upon return.”
“However,” said Corr, “one of the main attractions for a privacy-minded public in supporting and purchasing cryptocurrency like Bitcoin, is that it is hard for governments to track.”
“And so the uptake of the e-CNY is unlikely outside of China’s borders unless it manages to become hegemonic and force people and countries globally to use its currency.”
Cross-Border Ambitions
China will strengthen its cross-border yuan payments system and explore setting up infrastructure standards for a digital fiat currency as part of a five-year plan for financial standardization.The plan, to be implemented during the 2021–2025 period, was published by four regime agencies including China’s central bank and the securities watchdog earlier this month, but was dated Nov. 25, 2021.
From purchasing luxury goods to ride-hailing, Chinese citizens can now use Alipay and WeChat to make electronic payments outside of China by showing a QR code on their phones. U.S. merchants accepting China’s cashless mobile payments system can also reach Chinese customers at their stores in China.
The two dominant virtual wallet systems in China, taking up over 90 percent of the domestic mobile payments market, also announced they are teaming up with the digital yuan.
China’s biggest messaging and payment app WeChat said in January it will support the digital yuan. Its mobile payment and e-wallet service WeChat Pay has over 800 million active monthly users. Alipay, with more than 1 billion users, began trialing digital yuan payments last year.
Even so, such overseas payments are still processed domestically in China, independent economist Gong Shengli told the Chinese-language Epoch Times on Feb. 15.
“It does not equal the internationalization of the RMB, which has no international payment capacity,” he said, given that China’s yuan currency is not yet fully convertible, or not being able to move freely in and out of China. “Whether in the United States, Europe, or elsewhere, it’s just the internal circulation of RMB.”
However, observers still spotlight its potential to subvert the dominance of the U.S. dollar in the long run, especially when it allows countries sanctioned by the United States, such as Iran, North Korea, and Afghanistan, to conduct more business with China.
“Beijing would like to replace the trillions of dollars of foreign reserves in U.S. currency and the euro with its own currency, yielding a monetary windfall for Beijing and encouraging trade in yuan, which would encourage trade with China,” said Corr.
Left Out
In January, China’s central bank launched the e-CNY app for users in 11 regions and cities across the country, including the 2022 Olympic venues. Pilot versions of its digital yuan wallet application appeared online in the Chinese Android and Apple app stores on Jan. 4.A venture capitalist in Beijing surnamed Zhou, however, said the new app would unlikely beat similar products at the current stage, such as Alipay and WeChat Pay, given their strong foothold.
“Why would they change the way they’ve used to pay?” he said. “It gives you no other benefits.”
Huang (a pseudonym), a Shenzhen citizen, said neither he nor his acquaintances use the app. “For me, it is nothing better than Alipay and WeChat Pay,” he told The Epoch Times on Feb. 20.
Li Hongyan, a 20-year-old student volunteer at the 2022 Games, said, “I had heard of the digital yuan before, but I didn’t plan to use it until I was in the loop.” She only brought her phone, not realizing she wouldn’t be able to use her normal payment apps.
While Li is typical among Chinese participants, foreigners at the Games—the first from outside the country to use the new digital yuan—were largely unaware of it.
A number of servers at food and drink stands said that while Chinese customers were mostly using e-CNY for purchases, foreigners mainly used cash or Visa, whose Olympic sponsorship gave it exclusive international payment rights.
During one 30-minute period, 11 customers visited a coffee shop at Genting Snow Park, where snowboard and freestyle skiing events took place. The three Chinese customers paid using digital yuan apps to buy drinks and snacks, while one foreigner used cash and the other foreigners paid with Visa.
Foreign visitors polled informally inside the Games loop generally said they had not noticed the alternative payment option.
