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US Senator Ted Cruz tries again with new bill to block CBDC

Ted Cruz said it is “more important than ever” to ensure the financial privacy of American citizens is preserved.

Republican Senator Ted Cruz has introduced a bill to block the United States Federal Reserve from launching a “direct-to-consumer” central bank digital currency (CBDC).

In a March 21 statement, Cruz said he introduced the bill to prevent the Fed from developing a retail CBDC “which could be used as a financial surveillance tool by the federal government.”

Cruz stated it’s “more important than ever” to ensure U.S. policy on digital currencies protects “financial privacy, maintain’s the dollar’s dominance and cultivates innovation,” and added:

“CBDCs that fail to adhere to these three basic principles could enable an entity like the Federal Reserve to mobilize itself into a retail bank, collect personally identifiable information on users, and track their transactions indefinitely.”

Cruz claimed the federal government has “no authority to unilaterally establish” a CBDC.

“We should be empowering entrepreneurs, enabling innovation, and increasing individual freedom — not stifling it,” he stressed.

Cruz’s anti-CBDC bill has the backing of Republican Senators Mike Braun of Indiana and Chuck Grassley of Iowa.

In statements, both expressed the belief that a CBDC would be used as a surveillance tool.

If the bill is passed into law, it would ensure that the state isn’t “snooping” on the finances of hardworking Americans, Grassley stated:

"The American people ought to be able to spend their money how they choose without the possibility that every transaction could be tracked by the government."

The anti-CBDC bill is a second attempt by Cruz, Braun and Grassley, who introduced a similar bill on March 30, 2022 to prohibit the Fed from issuing a CBDC directly to individuals.

However, nearly 12 months later, the bill still hasn’t moved past the introduction phase.

Meanwhile, considerable progress is being made on a U.S. dollar CBDC since President Joe Biden signed an executive order to “Ensuring Responsible Development of Digital Assets” in March, 2022.

In November, the Federal Reserve Bank of New York and several large financial firms including BNY Mellon, Citi, HSBC, and Wells Fargo participated in a 12-week digital dollar pilot program with MasterCard and SWIFT.

Related: ‘Programmable money should terrify you’ — Layah Heilpern

Cruz, Braun and Grassley aren’t the only U.S. politicians fighting to stamp out CBDCs.

On March 20, Florida’s Governor Ron DeSantis called on state lawmakers to introduce legislation banning the digital dollar in Florida.

DeSantis compared the digital dollar to China’s digital yuan and claimed the e-CNY has been used to extensively “monitor citizen behavior,” saying:

“Any way they can get into society to exercise their agenda, they will do it. So, what the central bank digital currency is all about is surveilling Americans and controlling behavior of Americans.”

U.S. Congressman Tom Emmer recently introduced an anti-CBDC bill of his own on Feb 22.

Emmer also spoke of the privacy concerns surrounding CBDCs saying a programmable dollar could be “easily weaponized” as a spying tool to “choke out politically unpopular activity.”

Magazine: Are CBDCs kryptonite for crypto?

‘Surgical removal’ of crypto will only weaken USD dominance, commentators say

Digital Real Pilot to Run on Ethereum-Compatible, Permissioned Blockchain

Digital Real Pilot to Run on Ethereum-Compatible, Permissioned BlockchainAccording to the Central Bank of Brazil, the digital real pilot project will use an Ethereum-compatible, permissioned blockchain for the issuance of the tokenized version of the country’s currency. Hyperledger Besu, the open-source platform elected for the tests, will allow the project to run without any licensing costs and to deal with maintenance costs later, […]

‘Surgical removal’ of crypto will only weaken USD dominance, commentators say

China’s Wechat Adds Support for Digital Yuan Payments

China’s Wechat Adds Support for Digital Yuan PaymentsChinese social media platform Wechat has introduced support for the state-backed digital yuan in its popular payment app. Over a billion users will now ostensibly be able to take advantage of fast payments with the digital currency issued by the People’s Bank of China. Wechat Pay Follows Alipay in Integrating Payments With Digital Yuan The […]

‘Surgical removal’ of crypto will only weaken USD dominance, commentators say

US lagging on CBDCs could spell ‘trouble’ — Crypto Council policy head

Fanusie doesn’t believe the Chinese-led CBDC movement on the global stage will replace the U.S. dollar, but it may cause a series of geopolitical headaches.

A cryptocurrency researcher and former CIA analyst believes the United States government’s relatively slow start on Central Bank Digital Currency (CBDC) development may result in it losing grip on controlling the global financial system.

Yaya Fanusie, the policy head at the crypto advocacy group the Crypto Council for Innovation explained in a Feb. 28 Bloomberg interview that sanctioned states are looking to transact on financial infrastructure that isn’t controlled or heavily influenced by the U.S. in order to move funds more freely cross-borders.

If the U.S. continues to sit on the “sidelines” and lag behind on CBDC adoption, Fanusie believes this may spell “trouble” and cause unforeseen “geopolitical implications” over time:

Fanusie explained that state-issued CBDCs could be a part of this financial infrastructure that becomes globally adopted, and that if the U.S. has little influence over these new standards, then this “impacts U.S state economic statecraft.”

“The potency of our sanctions power comes from the centrality of the U.S. to the financial global infrastructure. So if that shifts a little bit, it doesn't mean that China is going to take over or that the yuan is going to displace the dollar but if there's a viable new rail where sanctioned actors can now transact, that’s trouble.”

The U.S. Federal Reserve has however recently made progress on its CBDC — the Digital Dollar Project — having released the latest version of its whitepaper on Jan. 18:

However, the Federal Reserve has not received approval from the U.S. government to proceed with the CBDC project.

Fanusie highlighted that China has benefited from a near-first mover advantage, having explored CBDCs since 2014 and launching the pilot version of its digital yuan (e-CNY) on Jan. 4, 2022, which Fanusie says has processed “millions of transactions” across “millions of wallets” so far.

Fanusie added that there is an “array of pilots” testing out smart contracts to add programmability into the CBDC and that China helping other countries adopt similar standards.

He added there is possibly an unspoken “race” going on in the CBDC frontier as nations look to gain a geopolitical edge.

“That's happening whether we want to like it or not.”

However previous commentators on the CBDC race between China and the U.S. have said that China’s CBDC ambition is purely about domestic dominance rather than trying to beat the U.S. dollar.

Related: What are CBDCs? A beginner's guide to central bank digital currencies

CBDCs run on state-controlled ledgers, which are reported to be more efficient and easier to use in some cases than decentralized public networks, such as Bitcoin and Ethereum.

However, some opponents of CBDCs believe states are adopting blockchain-powered CBDCs to maintain a degree of financial control over their citizens.

Part of the pushback in the U.S. recently came from pro-crypto U.S. Congressman Tom Emmer, who recently introduced the CBDC Anti-Surveillance State Act in an effort to protect the financial privacy of U.S. citizens from actions by the Federal Reserve:

‘Surgical removal’ of crypto will only weaken USD dominance, commentators say

China doles out millions in digital yuan in bid to boost adoption: Report

Multiple Chinese city governments have given away millions worth of e-CNY to try to promote consumption around the holiday season.

Millions of dollars worth of China’s Central Bank Digital Currency (CBDC) has been handed out across the country over the Lunar New Year period in a bid to boost its takeup.

According to a Feb. 6 report in the Global Times, an English-language outlet of the state-ran People’s Daily newspaper, around 200 “activities” for the e-CNY were launched across the country during the holiday period.

These "activities" were made to “promote consumption” — the first of such since the government recently relaxed COVID-19 restrictions.

Multiple cities reportedly gave away over $26.5 million, or 180 million yuan worth of the CBDC in programs such as subsidies and consumption coupons.

One example provided by the outlet included the Shenzhen local government handing out over $14.7 million (100 million yuan) worth of e-CNY to subsidize the catering industry in the city.

A QR code (blurred) for paying with digital yuan is displayed at a Chinese convenience store, users can scan the code and use e-CNY to pay for goods. Source

A Feb. 1 China Daily report said Hangzhou issued each resident a $12 (80 yuan) e-CNY voucher on Jan. 16 with the total giveaway costing the city around $590,000, or 4 million yuan.

Some of these initiatives proved to be very popular among residents. 

Citing data from the e-commerce platform Meituan, the Global Times rreport stated that e-CNY given away by the Hangzhou city government for the New Year celebrations was taken up by residents within nine seconds.

Related: Bank of China ex-advisor calls Beijing to reconsider crypto ban

The last few months has seen the government enacti other targets and features to boost the usage of the CBDC.

On Feb. 1, senior ruling party officials in Suzhou city set a tentative key performance indicator for the end of 2023 to have $300 billion (2 trillion yuan) worth of e-CNY transactions in the city.

The target is ambitious considering cumulative e-CNY transactions had crossed $14 billion (100 billion yuan) in October 2022, two years after the CBDC’s launch.

In late December last year, in a bid to attract new users the e-CNY wallet app introduced the ability to send “red packets,” called hongbao in China, which is used for gifting money around the holidays.

The wallet app received an update in early January allowing users to make contactless payments using Android phones — even if their device is without internet or power.

In December, a former Chinese central banker called the results of the e-CNY trials “not ideal,” and admitted, “usage has been low, highly inactive.”

‘Surgical removal’ of crypto will only weaken USD dominance, commentators say

Chinese Economist Urges Government to Reconsider Crypto Ban — Warns of Missed Tech Opportunities

Chinese Economist Urges Government to Reconsider Crypto Ban — Warns of Missed Tech OpportunitiesAn economics professor and former adviser to the People’s Bank of China has urged the Chinese government to reconsider its ban on cryptocurrencies. He warned that banning crypto activities could result in missed opportunities that are “very valuable” to regulated financial systems. Chinese Economist Warns of Missed Opportunities Due to Crypto Ban A former adviser […]

‘Surgical removal’ of crypto will only weaken USD dominance, commentators say

China’s Hainan to boost NFT oversight as digital yuan trial ramps

Hainan's market regulator wants to promote NFTs as part of the digital economy, but will actively work to weed out bad actors and speculative behavior.

Authorities from the Hainan province in southern China have vowed to increase oversight on the nonfungible token (NFT) sector to “promote the healthy development” of the sector and to stomp out fraud and other associated risks.

In a separate announcement, the People’s Bank of China (PBoC) also announced that it is working on new features for its Central Bank Digital Currency (CBDC) pilot program, referred to as the digital yuan or eCNY.

NFT oversight

In a public notice posted on Jan. 29, Hainan’s market regulator and nine other agencies from the province outlined a lengthy plan to tackle the NFT sector moving forward.

A translation of the document reveals that the regulator is placing emphasis on promoting NFTs as part of the digital economy, particularly as a way to attract foreign investment in the Hainan Free Trade Port. 

The province agencies however said they want to oversee the NFT market in a way that restricts “market chaos” such as misleading information, speculation, copyright theft, fraud, money laundering and fictitious value.

Some measures outlined include “severely” cracking down on false propaganda under current frameworks such as the “anti-unfair competition law,” preventing copyright infringement by guiding and urging internet platforms to remove such content, and cracking down on fraud.

An emphasis has also been placed on educating the public by conveying the “risks and laws” of the sector so that they “purchase cautiously” and avoid losses due to wild speculation on NFTs.

The Chinese government has had a unique outlook on the NFT sector since it boomed in popularity, while the asset class has not copped major blanket bans unlike private cryptocurrencies, state agencies have often been quick to deter any sort of speculative behavior.

Digital yuan adds bells and whistles

According to an announcement shared via Baidu on Jan. 30, the People’s Bank of China (PBoC) plans to add new features to its long-running pilot trails of the digital yuan.

The bank suggested that it is developing a QR code-based transaction system so that “ consumers can ‘scan with one code’” to make the CBDC more user-friendly.

It also emphasized that such tech integrations will help China “realize the interconnection between the digital renminbi system and traditional electronic payment tools.”

Another touted benefit of the QR code system is that merchants will be able “support various transactions” while limiting the increase of costs to consumers.

The PBoC emphasized that in 2022 it had piloted the CBDC across 17 provinces, and rolled out around 30 digital yuan red “envelope activities” in which it airdropped small amounts of the asset to citizens.

The campaign was used to promote the use of the asset, particularly concerning payments for “low-carbon travel” such as public transport.

Related: UK Bitcoin community reacts to incoming CBDC and digital pound rollout

Earlier this month, the eCNY network received a key upgrade via the integration of smart contracts.

According to a report from local crypto media outlet 8btc, smart contract features were launched via the food and retail focused delivery app from Meituan.

When users place and order and pay with their e-CNY wallet, a smart contract triggers and searches for keywords and purchased items in their order. If a user buys something on the list of keywords for the day, they go in the draw to win part of a prize worth around $1,300.

‘Surgical removal’ of crypto will only weaken USD dominance, commentators say

China’s digital yuan gets smart contract functionality alongside new use cases

China's central bank digital currency (CBDC) has seen new use cases in recent days, including buying securities and making offline payments.

China’s Central Bank Digital Currency (CBDC) — the digital yuan, or eCNY — has received upgrades giving it smart contract functionality alongside a series of newly unveiled use cases.

The smart contract function was launched on the Meituan app, a Chinese app offering retail and food delivery services, according to a Jan. 17 report by local cryptocurrency media outlet 8btc.

When Meituan users place an order and pay with their e-CNY wallet, a smart contract triggers and searches for keywords and purchased items in their order. If a user buys something on the list of keywords for the day, they go in the draw to win part of a prize.

The prize is a share of a “red envelope” known locally as hongbao containing 8,888 yuan, worth a little over $1,300.

Hongbao are small packets traditionally used for gifting money around Chinese New Year as a gesture of good luck.

A user prepares to send a digital red packet on the messaging app WeChat. Image: YouTube

In December last year, the e-CNY wallet app introduced a feature for users to send digital red envelopes in a bid to boost adoption before the Chinese New Year on Jan. 22.

Digital yuan sees new avenues for use

Alongside the latest development, new uses for the e-CNY have also been added over the last few days.

A Jan. 16 report from the China Securities Journal said e-CNY was used to buy securities for the first time. Investors can also use the CBDC to buy securities with the mobile app for Soochow Securities, a local brokerage firm.

The digital yuan wallet app also received an update with users now able to make contactless payments using Android phones even if their device is without internet or power according to a Jan. 11 Yicai Global report.

The new uses for the digital yuan come as China has been struggling with the adoption rate of its CBDC.

Related: CBDCs not worth the costs and risks, says former BoE advisor

A former official from the People’s Bank of China (PBOC), the country’s central bank, even made a rare public admission in December 2022 saying the digital yuan’s “usage has been low” and “highly inactive” and added, “the results are not ideal.”

On Jan. 10, the PBOC included e-CNY in currency circulation reports for the first time revealing the CBDC represented roughly 0.13% of the 10.47 trillion yuan ($1.54 trillion) in circulation at the end of 2022.

‘Surgical removal’ of crypto will only weaken USD dominance, commentators say

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‘Surgical removal’ of crypto will only weaken USD dominance, commentators say

China’s Digital Yuan Little Used, Former Central Bank Official Says

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‘Surgical removal’ of crypto will only weaken USD dominance, commentators say