Yuan

China was one of the first nations to start working on its CBDCs. However, despite the completion of its development, the government is yet to officially launch the CBDC.

China is expanding the use cases for its central bank digital currency (CBDC) called digital yuan or e-CNY for its Belt and Road initiative and cross-border trades. The digital yuan a.k.a. digital RMB was one of the first CBDCs to be developed and widely tested. While there hasn’t been an official launch, the government has expanded its testing parameter to include multiple cities and millions of people.

A plan promoting the use of the Chinese digital currency in cross-border trade was issued in Xuzhou city, which serves as the departure point for numerous goods trains from China headed for Europe. There are 18 regular cross-border rail connections from the city to 21 nations in Asia and Europe, reported the South China Morning Post.

Xuzhou is a trade hub and plans to promote e-CNY use to pay for services and storage charges for goods carried by cross-border trains. The experiment plans to extend e-CNY usage to pay taxes and utility services in the city in future.

Jiangsu province in particular has been quite proactive in promoting digital yuan use cases. Changshu, another city in the province announced it will pay civil servants and people who work for public institutions using digital yuan.

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Apart from Xuzhou, the Hong Kong Monetary Authority announced that Guangdong-Hong Kong- Macau Greater Bay Area will be a testing ground for making cross-border payments using digital yuan.

"The HKMA is working with mainland's central bank, the People's Bank of China, to test the digital yuan as a cross-border payment tool in Hong Kong," said HKMA deputy chief executive Darryl Chan.

Chan added that another cross-border project involving Thailand and the United Arab Emirates was being looked into by the HKMA, China, and two other nations in order to "improve efficiency and reduce the cost of cross-border transactions".

The Chinese government has ramped up its CBDC efforts at a time when the international trade markets are moving away from the standard U.S., dollar. Recently, China has completed multiple trade treaties with the likes of Russia and India based on their national currency over the U.S. dollar.

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The former CFTC chair argues that AML and KYC measures are outdated and constitutionally questionable and said crypto technology can do better.

The United States should lead the development of Central Bank Digital Currencies (CBDCs) away from being “surveillance coins” and towards being "freedom coins,” says the former chair of the Commodity Futures Trading Commission (CFTC).

In a Mar. 13 op-ed in The Hill, Christopher Giancarlo, nicknamed "Crypto Dad" for his pro-crypto outlook, said the U.S. "must influence" CBDC development towards protecting "democratic values like freedom of speech and the right to privacy, " leveraging current technology used by some cryptocurrency protocols.

My op-ed in @theHIll with @Jim Harper: the question is not whether #CBDCs can be stopped (they can’t), but whether sovereign AND non-sovereign #digitalcurrency will enslave or liberate citizens of free societies. https://t.co/h1oT14NalK

— Chris Giancarlo (@giancarloMKTS) March 13, 2023

Giancarlo, the co-founder of the Digital Dollar Project that focuses on researching the implications of a U.S. CBDC, elaborated on the privacy considerations in a Mar. 1 report he co-authored for the policy think tank, the American Enterprise Institute (API) with API fellow Jim Harper. 

He said the U.S. must advocate for a "freedom coin" — a CBDC that guarantees a high level of privacy.

Giancarlo and Harper argued in the paper that CBDCs offer an opportunity “to reassess contemporary financial surveillance activities” and could possibly enhance constitutional protections.

To achieve this, a CBDC could take advantage of crypto technology, such as “zero-knowledge proofs, homomorphic encryption, and multiparty computation, that enable parties to prove an encrypted proposition is true without revealing the underlying information," they said.

My report today w/@AEI’s @JimHarper: #CBDC & #stablecoins must preserve privacy & security, economic liberty, free speech & personal autonomy. https://t.co/pB8uaA3KIT

— Chris Giancarlo (@giancarloMKTS) February 28, 2023

These technologies would make “intelligent enforcement” of crime prevention possible, the authors argued.

First, the U.S. would have to reexamine current financial surveillance policies. The authors took issue specifically with one recent document published by the administration of U.S. President Joe Biden:

“The White House Office of Science and Technology Policy’s (OSTP) recent Technical Evaluation for a U.S. Central Bank Digital Currency System shows that financial surveillance in the West is more like China’s than many would like to admit.”

The OSTP paper showed an “unwillingness to evolve beyond today’s constitutionally suspect financial surveillance system,” they said.

Giancarlo and Harper pointed to the Anti-Money Laundering (AML) and Know Your Customer (KYC) measures as problematic, saying they allowed too much surveillance without probable cause.

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If a CBDC's privacy is not guaranteed, there is a risk of it being used as it is in China, they argued.

There, the e-yuan “will allow the Chinese government to link political conformity to individual prosperity and relegate political dissenters to poverty” by making all transactions visible to the People’s Bank of China, they opined.

The authors’ thoughts have much in common with concerns expressed by U.S. Senator Tom Emmer, a vocal opponent of a U.S. CBDC who introduced the CBDC Anti-Surveillance Act in 2022.

Emmer has expressed concern over a CBDC that “tracks transaction level data down to the individual user” and can be programmed “to choke out politically unpopular activity.” Emmer is also co-chair of the U.S. Congressional Blockchain Caucus.