US Senator: China’s Digital Currency Could Subvert US Sanctions, Enhance Surveillance Capabilities

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US Senator Pat Toomey sent a letter to Treasury Secretary Janet Yellen and Secretary of State Tony Blinken last week raising concerns about China’s central bank digital currency, the digital yuan.

“I write to request your engagement on a momentous development in Beijing this week: the rollout of the world’s first major central bank digital currency (CBDC) to a foreign audience,” he told Yellen and Blinken.

“While the United States is still evaluating the concept of a digital dollar, China is using the Beijing Winter Olympics as an international test for the digital yuan (eCNY), which has been piloted domestically since 2019,” the lawmaker from Pennsylvania described, elaborating:

Analysts have raised the eCNY’s potential to subvert U.S. sanctions, facilitate illicit money flows, enhance China’s surveillance capabilities, and provide Beijing with ‘first mover’ advantages, such as setting standards in cross-border digital payments.

The senator noted that “Beijing has also launched the first state-backed global distributed ledger infrastructure, the Blockchain-based Services Network (BSN).”

Furthermore, Senator Toomey commented on China’s cryptocurrency crackdown, stating: “China’s crackdown presents an opportunity for the United States to be the forerunner of crypto innovation, grounded in individual freedom, and other American and democratic principles.”

The senator continued:

Given the prospective threat to U.S. economic and national security interests, I request that the Treasury and State Departments closely examine Beijing’s CBDC rollout during the Olympic Games.

Senator Toomey also requested information on nine areas to be provided to his office by March 7.

They include how the digital yuan was distributed, strategies employed to advance eCNY adoption by Chinese and non-Chinese persons, eCNY adoption rate by foreigners, total issuance of the eCNY after the Olympic Games, lessons for the U.S. government, and possible challenges to U.S. interests.

In January, China’s central bank, the People’s Bank of China (PBOC), revealed that the digital yuan now has more than 261 million users, and transactions worth almost $14 billion have been made using the central bank digital currency. Last week, China designated 15 national pilot zones and 164 entities for blockchain projects.

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