Center for Technology and Innovation

Reason: Dear Olymp⁠i⁠cs Med⁠i⁠a: Please Spare Us Your Fawn⁠i⁠ng Over Ch⁠i⁠na’s D⁠i⁠g⁠i⁠⁠t⁠al Surve⁠i⁠llance

By: Andrea O’Sullivan / 2022

Andrea O’Sullivan


Center for Technology and Innovation


The Olympics are here again! So soon? It’s not your imagination: the 2020 games in Japan wrapped up in 2021 due to COVID postponement. And speaking of COVID, the 2022 games are in China. The Chinese Communist Party is certainly hoping to spiff up their image after these bruising past two years, and I don’t just mean through the impressive spectacles during the festivities itself.

The CCP wants to dazzle the world with its sparkling digital panopticons, the crown jewel being its “central bank digital currency,” or CBDC. China’s government-controlled digital yuan, also called e-CNY, has been in the making for several years and will be “premiering globally” during the Olympics. The CCP is hoping that foreign journalists will marvel at the efficiency and speed of such a centralized payment system. Unfortunately, I expect much of the Western press to gobble it up.

It started happening well before the opening ceremony. One glowing preview in Fortune talks about how the digital yuan will “broaden financial inclusion and promote equitable growth.” The author uncritically repeats the People’s Bank of China’s (PBOC) arguments that the government will be a better steward of user data than popular private payment apps WeChat Pay and Alipay. Without skipping a beat, he goes on to write that PBOC will collect “real-time data on the creation, bookkeeping, and circulation of money” to better help “set monetary policy.” The conclusion: the digital yuan should “become a model” for other countries.

Well, before a worldwide spread, the digital yuan should probably successfully become a model for China itself. Despite all the pomp and coverage, China’s CBDC isn’t actually that popular among Chinese citizens. The government has been rolling out test programs on select cities like Shenzhen (a tech hub) and Chengdu since 2020. China expanded the pilots in a handful of other mysterious cities—the Atlantic Council could only identify 13 of the 28 total—throughout the past two years.

But for whatever reason, the Chinese just aren’t that into the digital yuan. Official PBOC figures estimate that some $13.68 billion in transactions have occurred since e-CNY debuted two years ago. That’s chicken feed in China. For comparison, Alipay alone handles some $1.5 trillion in payments on average each month.

Chinese consumers are famously cool with digital payments. They more or less decided to go cashless on their own. Around 90 percent of all Chinese transactions are routed through WeChat Pay or Alipay. It’s just easier—scan a code, push a button, end of transaction. Throw in how essential an app like WeChat is for daily Chinese life and it’s easy to see how digital payments have become so ingrained in China.

The CCP must have thought it would be easy to convince Chinese consumers to switch over to their patriotic alternative. Good on citizens for ignoring it. Say what you will about the close party connections of the centralized all-inclusive data repositories that are Alipay and WeChat Pay, at least these companies are not literally the government.

Actually, China has been undergoing its own “war on big tech” for some time. Although many in the West view Chinese companies as de facto extensions of the Chinese state, the CCP has been cracking down on tech giants like Alibaba and Tencent, who respectively own Alipay and WeChat. As evidenced by the PBOC’s negative comments about the payment giants’ data practices, the CCP sees the digital yuan at least partly as a way to wrest control from private tech companies.

So now we come to the Olympics and the Chinese CBDC’s big international debut. Maybe some global googly eyes can inspire some new enthusiasm for the government’s dud of a digital currency.

Athletes and staff in the Olympic Village will have just three options to make payments: cash, Visa, and the digital yuan. To use e-CNY, visitors can use a kiosk to convert their local currency into the digital yuan which is then loaded on a debit card. Then you just use the card like any other. The PBOC wants to sweeten up the deal a bit, so they’ve made wearables like smart watches, ski gloves, and Olympic pins that can be loaded with the currency and scanned to make payments.

Alas, China has been a bit hoisted by its own petard. COVID-19 isolation rules are pouring cold water on the country’s plans for a big digital yuan splash. Limiting the number of fans who can attend the games necessarily limits the number of people who can be exposed to the hottest innovations in Chinese spyware.

And it’s not like the American government is unaware of the intentions here. Officials have warned athletes not to use the digital yuan because of the surveillance risk. The U.S. Olympic and Paralympic Committee has urged Team USA to just ditch their phones altogether and bring a burner instead. It’s not bad advice. (The “bad advice” title goes to Rep. Nancy Pelosi’s confusing exhortation for athletes to condemn Chinese human rights abuses while not making the CCP mad.)

When it comes to China, many in the West feel these kinds of government expansions “can’t happen here.” Well, CBDCs are hardly a Chinese phenomenon. Most governments in the West are considering or actively developing their own digital currencies to impose on the population. Just last week, the Boston Fed put out an exploratory paper on their “Project Hamilton” to develop a “high-performance and resilient transaction processor for a CBDC.” China’s CBDC started with an exploratory paper, too.

If you want a fast, reliable, secure, borderless global payment system, we already have bitcoin. If you want it to be private, too, there are ways to do that (or you can use Monero). There is no need for the government to get involved. Unless you support the government—then you want them to have all the power they want.

Keep this in mind if you see any Olympics journalists fawning over China’s digital yuan. It’s not the efficiency that impresses them—plenty of cryptocurrencies do that. It’s the state control.

ANDREA O’SULLIVAN is the Director of the Center for Technology and Innovation at the James Madison Institute in Tallahassee, Fla. Her work focuses on emerging technologies, cryptocurrency, surveillance, and the open internet.

Read the original article from Reason here: