How China is using the blockchain to suppress the population

China is considered a pioneer in the field of digital central bank currencies. However, the latest findings give an idea of ​​why many Chinese have to pay dearly for the e-yuan.

It is no secret that China is one of the world’s leading nations in the field of blockchain technology. Almost two thirds of the global Bitcoin hash rate are based on the gigantic mining farms of the Middle Kingdom. The country is also playing a pioneering role in the area of ​​digital central bank currencies (CBDC). In the past, several lotteries were run in China to test the national CBDC. Citizens received small amounts of the digital currency and could then spend them at several acceptance points. To further increase adoption, the Bank of China (BoC) ATMs that allow citizens to deposit and withdraw e-yuan and exchange fiat currencies for their digital counterparts.

In the long term, China would like to make the e-yuan the country’s central means of payment. But critics have long criticized the associated risks that the Chinese people are facing. These concerns heightened when a BoC official announced that anonymizing the digital yuan was “not an option.”

E-Yuan: A wolf in sleepwear?

It is widely known that China cares little or nothing about the privacy of its citizens. In addition to exerting influence on actually autonomous areas, such as Tibet or Inner Mongolia, or the persecution of the predominantly Muslim population of Xinjiang, the Uyghurs, China is also criticized for introducing the “Social Credit System” (SCS). Since 2014, the state has been working on the implementation of a data-based, digital monitoring, recording and rating system that classifies and evaluates private individuals, government employees, companies, organizations and associations. Bad behavior is sanctioned – good behavior benefits. An Orwellian big brother come true.

In combination with the SCS, the e-yuan would give Beijing additional tools to expand the Chinese surveillance state. Because the means of payment is anonymous only among citizens. The Chinese authorities can always see who bought what and where. And that’s not all: In addition to monitoring its citizens, China, as the custodian and administrator of the e-yuan wallets, could also decide who can buy what and when. Did you go through the red lights yesterday? Then there is no beer at the Späti next door today.

Rainer Hahn, who has lived in Asia for over 20 years, is watching this development with concern. He explained to BTC-ECHO that the effects of the e-yuan on the point system in China would be considerable, as it would link the money to system loyalty. In this case, the aim of the central bank is not only to have complete control over the citizens, but also to ensure compliance with the system.

There are also concerns on Twitter. The user “BTC Batman” writes that China has “already tested this type of scenario with social credit and facial recognition”. With CBDC, the central government can maintain this control even without the need for facial recognition systems.

In addition, Yaya Fanusie, deputy partner of the US think tank CNAS, alleged to the Wall Street Journalthat China plans to give e-yuan some sort of expiration date, which would render them worthless after a certain period of time.

How China’s decay system works

Rainer Hahn explained to BTC-ECHO how exactly this expiration system should be understood:

The test with the lottery in China “raffled” around 25 US dollars each to a certain number of people, which must be used up within a defined period of time. If this amount is not used within this period, the outstanding amount is simply deleted from the “wallet”. […] The subject of the expiry date can be compared to vouchers.

Yaya Fanusie gets even more specific. Because China regulates the validity of the yuan, this could also have an impact on national and international companies. Since China’s declared goal is the abolition of cash, Beijing could force its companies to accept e-yuan as the only means of payment. Foreign companies would then be forced to exchange their currency for e-yuan and also come under the control and surveillance wing of the Chinese government. So far, however, it remains to be seen whether this scenario will come true.

China is advancing at a rapid pace in the development of the e-yuan. Although this means technological advances for the country, many Chinese people also pay with something that cannot be weighed in money – their freedom.