Fintech, Blockchain, DCEP Key to BRI’s Risks to US Interests
The Belt and Road Initiative (BRI) presents significant risks for U.S. economic, political, climate change, security, and health interests, the Council on Foreign Relations (CFR) has said in a new report.
Among these risks are those stemming from China’s growing financial technology companies as they will gain access to millions of consumers across the more than 140 countries in the initiative’s track while potentially giving Beijing major surveillance opportunities, it adds.
Others noted by the think tank include those that are likely to be brought about by the 2020 launch of the Blockchain Service Network (BSN) and the Digital Currency/Electronic Payment (DCEP) to replace China’s physical currency, yuan.
China’s fintech push into BRI countries
“Through BRI, China began addressing long-standing needs of people living in developing countries for power and transportation, filling a void created when the United States and many of its partners and allies refrained from similar investments,” the report states.
It points that Chinese fintech companies have been quick to address the unmet need of the nearly two billion adults who lack access to a bank account or mobile money provider in a number of BRI countries, particularly in Southeast Asia and Africa – though countries like Indonesia and Nepal have resisted them because they cut out their countries’ central and local banks, can make it harder to account for financial flows, and risk hardwiring their banking system to the Chinese economy.
While driving the outward expansion of Chinese fintech, the report says the companies often use the BRI (or Digital Silk Road) label to gain domestic political support for their overseas commercial expansion and leverage the market access provided by BRI projects.
Concerns for China’s blockchain interest
Beijing’s focus on blockchain technology, which the think tank says Chinese leaders see as the foundational infrastructure for future technological innovation, is another concern raised especially with the BSN launch.
Designed to leverage blockchain technology to offer software developers a cheaper alternative to current server storage space offerings, several major blockchain projects have joined BSN to integrate their own chains with it thereby enabling developers to create applications on the larger and less expensive platform.
“Such integration also allows Beijing to bring this “international plumbing,” including the network infrastructure in Australia, Brazil, France, Japan, South Africa, and the United States, under its influence,” the report states, citing a section of the BSN white paper which notes that “it will become the only global infrastructure network autonomously innovated by Chinese entities and for which network access is Chinese-controlled” upon full global deployment.
“Some analysts have expressed concern that Chinese firms’ dominance over BSN, which could provide Beijing influence over blockchain networks outside China, presents security risks comparable to those raised regarding Chinese firms’ control over 5G networks. If illicit actors were to use applications built on BSN, the United States’ ability to take cryptocurrency-related enforcement actions or to prosecute those violating U.S. law related to certain cybercrimes could depend on cooperation from China for the digital data evidence needed to make a law enforcement case.”
China’s “digital authoritarianism” with e-CNY
Similar concerns were raised over China’s fast-moving plans for a digital yuan through its CBDC project. The CFR says the DCEP’s design gives China’s central bank real-time financial surveillance of all users’ transactions, potentially bolstering the government’s control over private behavior and adding to the reach of its “digital authoritarianism.”
Olusegun Ogundeji writes on tech-related issues including from the crypto/Blockchain space.
Please sign in first