Surveillance and total control have always been a major goal of the Chinese Communist Party, China’s Central Bank Digital Currency (CBDC), which is also commonly known as ‘DC/EP’ is also another way in which it could increase the scope of that control. The CBDC is a form of digital fiat money – a currency established by governments and backed by governments. The concept of CBDC is similar to currencies like Bitcoin but differs in the key aspect that CBDC is backed by a state apparatus and is considered legal tender by the government.
Given China’s large domestic market, DC/EP is currently rapidly progressing and while its initial impact will primarily be domestic, its long-term and global impacts have not even been considered by policymakers and lawmakers. DC/EP has the potential to have serious ramifications for governments, investors, and companies. DC/EP, once fully implemented has the potential to become the world’s largest centralised repository of financial transactions data. This system may provide certain short-term benefits such as tackling the issue of money laundering, but in the long run, this system allows the Chinese government unprecedented access to the financial records of its citizens and companies and increases the opportunities for surveillance.
As mentioned above, the DC/EP will create a repository of digital transactions and the Chinese government will have full access to this data. While at first glance it seems that such a change might only have domestic impacts, such a way of thinking is naïve. There is a possibility that the DC/E might be exported beyond China through the digital wallets of Chinese tourists, students and business people. It is further possible that the Chinese government may incentivize or even mandate the use of DC/EP so that foreign companies and individuals will need to utilise it in order to carry out certain categories of cross-border RMB transactions. This will force foreign entities to use China’s Central Banking Digital Currency in order to access the Chinese marketplace.
