The emergence of the digital yuan, China’s digital currency, is not to everyone’s liking. In the context of the current rivalry between China and the United States, American senators, members of the Republican Party, are working on a bill intended to ban American application stores – including those managed by Apple and Google – from to host applications for making payments with Chinese digital currency. For them, the central bank digital currency (CBDC) promoted by Beijing could allow Chinese authorities to spy on American citizens.
Unveiled at the end of last week and first spotted by the Reuters agency, this bill puts companies that own or control application stores, like Apple and Google with the App Store and the Play Store, at the foot of the wall. If adopted, the latter “will no longer have to offer an application in [leur] app store in the USA that supports or enables e-CNY transactions [l’autre nom donné au yuan numérique] “.
For the American senators behind the bill, there is an urgent need to legislate. They fear that the digital yuan will give Chinese authorities “real-time visibility into all transactions on the network, posing privacy and security concerns for Americans who join this network”.
The digital yuan, a weapon for Beijing?
The WeChat platform (owned by Chinese giant Tencent) is starting to support Chinese digital currency. Meanwhile, Alipay, the hugely popular payment app owned by Jack Ma’s Ant Group, also accepts digital currency. However, these last two applications are available on the Apple and Google application stores. Still, the bill arouses many criticisms in the Middle Kingdom. The Chinese Embassy in Washington called the legislation “a new example of the United States wantonly intimidating foreign companies by abusing state power on the untenable grounds of national security.”
Although cryptocurrencies represent only a tiny margin of total financial assets in the world, their development has prompted many central banks to react to the risks they pose to the stability of the financial system in the medium term. In Europe, the European Central Bank (ECB) is thus betting on the issuance of a digital euro to “bring crypto-assets into the field of regulation”, according to a recent formula by Fabio Panetta, member of the ECB’s executive board in in charge of the digital euro project.
In China, the authorities have already gone further by prohibiting financial activities involving cryptocurrencies on Chinese territory at the end of 2021. The Chinese government, however, has created its own alternative with the digital version of the yuan. Dubbed Digital Currency Electronic Payments (DCEP), the digital yuan was developed on blockchain and cryptography technologies and may later support Near Field Communication (NFC) capabilities, to enable off-the-shelf money transfers. line between two nearby digital wallets.
The DCEP can be downloaded to mobile devices using approved apps, including AliPay, WeChat and Apple Pay, and its trial use began last year amid the global pandemic.