Strategies with the Chinese digital yuan raise alarm in the United States

China is resorting to various strategies to encourage the use of the digital yuan, its tokenized central bank currency (CBDC). This is due to the little traction that this centralized asset has had in the Asian giant.

Among these strategies, the offering of economic benefits to bank clients who use that currency stands out. In this way, the Industrial Bank of China announced the activation of an option so that customers who pay with the digital yuan are rewarded with carbon credits, a benefit of that financial institution.

According to the official announcement of the entity, users who have opened a Banco Industrial wallet with or without identification, can earn points in the carbon account of that banking institution. once they have made retail payments with the digital yuan through the bank’s mobile application.

Carbon credits from the Industrial Bank of China are a system that has been used for different areas, according to that entity. Among those, living expenses, fund purchases and credit card repayments.

The Industrial Bank’s move is part of strategies to encourage China’s CBDC to be integrated into the country’s economy and finances. For this, the entity grants economic incentives aimed at getting more customers to start using the digital renminbian asset that has been widely supported by that state-owned banking entity.

These Chinese strategies are executed since the CBDC is not widely accepted by the population of the Asian country. This is something that is manifested in the fact that only 0.13% of the total cash and reserves held by the central bank, until January of this year, was represented in digital yuan.

A CBDC for social control

Although traction has been low, the digital yuan is currently one of the most advanced CBDC projects, as it is in the testing phase and there are several million coins currently distributed. However, China’s CBDC is a tool that encourages social control. This, because it makes supervision and surveillance of citizens easieraccording to Dovey Wan and Yaya Fanusie, experts in financial security issues.

A characterization that is different from what the United States wants for its own CBDC, the digital dollar. This is demonstrated by the fact that a historic milestone was recorded in that country last week, when the Lower House of Congress approved a law that prohibits the government from issuing a central bank digital currency that, like China’s, serves to exercise social control.

As reported by CriptoNoticias, Republican Congressman Tom Emmer’s bill was approved with more than 200 votes. It prevents the development of a CBDC that “would threaten Americans’ right to financial privacy.”

The bill will now be put to a vote in the Upper House of the US Congress, and if it receives approval there, it will go to the Oval Office of the White House to be signed into law by President Joe Biden.

If this happens, the US CBDC, the digital dollar, will have to be developed with the prior approval of the Legislature and not by the will of the Federal Reserve (Fed) or the United States government.

Various strategies to use the digital yuan

China’s strategies to encourage the use of the digital yuan go beyond just offering financial benefits to customers. The use of the CBDC is also encouraged from the retail bases of the economy.

For example, Banco Industrial itself, as part of its desire to promote the use of the digital yuan, participated in the first transaction with this CBDC to buy carbon sinks for fishing. With the same objective, in the autonomous region of Hong Kong the digital yuan has been allowed to be used in local stores since mid-May. It, to promote the use of that CBDC at the retail level.

The same was applied in businesses within Chinese territory, which since September 2023 integrated the digital yuan into all payment platforms. that are used by consumers, such as WeChat and Alipay.

In similar events, China’s central bank allowed the digital yuan to be used by foreigners visiting the Asian giant. As part of its strategy to promote the use of the asset, the entity established the steps for tourists to use that CBDC through different banks or authorized operatorsamong them, Banco Industrial.