US call for ban on digital Yuan only reveals their ignorance, says Chinese Foreign Ministry

• US Republican senators urge the Olympic Committee to ban athletes from using digital Yuan over spying concerns.
• Senators' letter suggests China's digital currency has problematic privacy implications.
• Chinese Foreign Ministry spokesman asks US politicians to stop complaining about the digital currency.

Republican senators are citing espionage and security concerns over the use of e-Yuan. All US Congress members have asked for a briefing on their request within 30 days. Earlier this month, Beijing confirmed that Olympics 2022 is the next key trial for the digital Yuan. 

China's e-Yuan has triggered Republican Senators' concerns

Republican Senators Cynthia Lummis, Marsha Blackburn, and Roger Wicker have urged the US Olympic Committee through a joint letter to ban the use of digital Yuan in the 2022 Beijing Winter Olympics. 

In their letter, the senators have stated that the digital Yuan is entirely controlled by the People's Bank of China (PBoC) and can be tracked and traced by Chinese authorities. In April 2021, China's Central Bank revealed key features of the digital currency. Features included the ability of the government to know the exact details of what someone purchased and where. 

Responding to the Republicans' concerns, China's Foreign Ministry spokesman Zhao Lijian said,

The lawmakers' actions only revealed their ignorance. We suggest they figure out what a digital currency really is. The US politicians should abide by the spirit stipulated in the Olympic Charter, stop making sports a political matter and stop making troubles out of the digital currency in China.

The e-Yuan white paper released by the PBoC states that overseas visitors will be granted access to China's digital currency without the need to open a local bank account during trials at the 2022 Winter Olympics in Beijing. Though it does not reveal other specific details like tracking the location and purchase details of the Central Bank Digital Currency (CBDC) users, it states that PBoC has the confidence to continue increasing the scope of the trials. 

The "increase in scope" may be perceived as "international usage" by US lawmakers and other authorities. However, Chinese officials have repeatedly asserted that the e-Yuan will mainly be used for domestic retail transactions. 

As a CBDC in its early stages, the e-Yuan is collecting user information for conducting successful trials. Running trials on international users during the Olympics gives rise to questions on where Beijing's CBDC stands against the world's dominant reserve currency, the US Dollar. Federal regulatory agencies in the US recently discussed the inherent risks of stablecoins and called for a regulatory framework.

US Treasury Secretary urged federal agencies to regulate stablecoins

Janet Yellen, the US Treasury Secretary, discussed the growth of stablecoins with five federal regulatory agencies – Securities & Exchange Commission, Federal Reserve, Commodities Futures Trading Commission, Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency. Yellen advocated setting up regulations for national security and protecting the financial system and stablecoin users. 

Secretary Yellen briefed the officials representing the regulatory agencies were briefed on an upcoming report on stablecoins and the need to address regulatory gaps in the current framework. The concern comes when China's PBoC is set to run trials for its e-Yuan on international users in the Olympics. 

Stablecoins have primarily been used to facilitate cross-border payments, making it essential for US authorities to regulate the asset class before US citizens participate in the e-Yuan trials during the Olympic games (if they do). 

The US Treasury noted last week,

Bringing together regulators will enable us to assess the potential benefits of stablecoins while mitigating risks they could pose to users, markets, or the financial system.