GOP senators want to ban China’s digital currency from US apps and app stores

Three Republican senators are proposing a law to prohibit app stores from carrying apps that accept payments using China’s digital currency. The “Defending Americans from Authoritarian Digital Currencies Act” would prohibit app stores in the US from carrying or supporting any app “that supports or enables transactions in e-CNY,” also known as the digital yuan or digital renminbi.

The app stores would also be prohibited from supporting or enabling digital yuan transactions. The bill defines an app store broadly as “a publicly available website, software application, or other electronic service that distributes applications from third-party developers to users of a computer, a mobile device, or any other general purpose computing device.”

The bill was proposed by Sens. Tom Cotton (R-Arkansas), Mike Braun (R-Indiana), and Marco Rubio (R-Florida). “The Chinese Communist Party will use its digital currency to control and spy on anyone who uses it. We can’t give China that chance—the United States should reject China’s attempt to undermine our economy at its most basic level,” Cotton said in a press release on Thursday.

Braun said the “digital yuan allows direct control and access to the financial lives of individuals. We cannot allow this authoritarian regime to use their state-controlled digital currency as an instrument to infiltrate our economy and the private information of American citizens.”

Ban could affect WeChat and Alipay

As Reuters reported, the legislation’s introduction “comes after WeChat, a messaging and payment application owned by China’s Tencent with over 1.2 billion users, announced it would begin supporting the currency earlier this year. Alipay, the hugely popular payments app owned by Jack Ma’s Ant Group, also accepts the digital currency. Both apps are available in the Apple and Google app stores.”

Rubio called China’s digital money a “major financial and surveillance risk” and said, “it makes no sense to tie ourselves to the digital currency of a genocidal regime that hates us and wants to replace us on the world stage.”

Meanwhile, the Chinese Embassy in Washington called the legislation “another example of the United States wantonly bullying foreign companies by abusing state power on the untenable ground of national security,” according to Reuters.

In March, nine Republican senators proposed a series of reports and standards to study and manage the risks posed by the digital yuan.

How digital yuan can be used for surveillance

The digital yuan is in the early stages of rollout. Akram Keram, an expert on China at the National Endowment for Democracy, wrote last year that the digital currency would give the Chinese Communist Party “direct control over and access to the financial lives of individuals, without the need to strong-arm intermediary financial entities. In a digital-yuan-consumed society, the government easily could suspend the digital wallets of dissidents and human rights activists, for example.”

A January 2021 report by the Center for a New American Security said:

DCEP [Digital Currency/Electronic Payment] is likely to be a boon for CCP [Chinese Communist Party] surveillance in the economy and for government interference in the lives of Chinese citizens. DCEP transactions will contain precise data about users and their financial activity, all easily accessible to the PBOC [People’s Bank of China]. The central bank—as the registrar and verifier of the digital currency—will likely be able to cut off access to DCEP funds in order to punish or coerce any user. The CCP has already begun to increase its punitive powers within the central bank, running an internal team from the Central Commission for Discipline Inspection (CCDI) within the PBOC that investigates graft. DCEP would help the CCP solidify authoritarian control and crackdowns on dissident groups.

The Atlantic Council think tank described how the digital yuan is used in a March 2022 report. Wallets can be software-based through “the e-CNY mobile app, which allows users to manage their e-CNY transactions,” or hardware-based with “an electronic card that allows for touch-based transactions,” the report said.

To manage the system, “China is using a centralized ledger to record retail transactions and, in parallel, implements a [distributed] ledger for the reconciliation period at the end of the day,” the Atlantic Council said. As for the digital yuan’s potential use outside of China, the Chinese government “is working with the Bank for International Settlements on its mBridge project, along with Hong Kong, Thailand, and the United Arab Emirates to develop a prototype for an interoperable wholesale CBDC.”