US Senator References BSN in Call to Monitor e-CNY use During Olympics
In expressing his concerns over the use of the digital yuan (e-CNY) by American athletes at the ongoing Olympic Games in Beijing, Senator Pat Toomey has become the first US politician to reference China’s Blockchain-based Services Network (BSN) network. The BSN, the first state-backed global distributed ledger infrastructure launched in April 2020, was led by some public entities including banks and technology companies to offer a service that would help Chinese companies adopt blockchain faster and for less.
While its launch was suggested to increase the blockchain adoption competition between countries, China’s leadership, mistrust, and its being led by a centralized organization were some of the issues that emerged with it. Ashish Singhal, CEO of Coinswitch.co said at the time that BSN being the first and probably the largest attempt at blockchain adoption by the government of a powerful nation could also be an attempt by the Chinese government to control the industry.
Some elements of these concerns were noticed in the US senator’s letter to the Secretary of the Treasury, Janet Yellen, and the Secretary of State, Antony Blinken, this week to request their engagement on “the rollout of the world’s first major Central Bank Digital Currency (CBDC) to a foreign audience.” He notes that the BSN was “designed to be a Chinese state-controlled blockchain internet and the technological backbone of China’s Belt and Road Initiative” as he makes the case for the e-CNY’s “prospective threat to U.S. economic and national security interests.”
“Analysts have raised the eCNY’s potential to subvert U.S. sanctions, facilitate illicit money flows, enhance China’s surveillance capabilities, and provide Beijing with “first mover” advantages, such as setting standards in cross-border digital payments,” the letter says. It also adds that while China appears to embrace blockchain, its regulators have banned the use of cryptocurrencies which are built on the technology they view “decentralized and permissionless network money as a threat to Beijing’s digital authoritarianism.”
The crackdown presents the U.S. with an opportunity to be explored, the senator writes, even as he calls for a close examination of Beijing’s CBDC rollout during the Olympic Games including the digital currency’s distribution, its underlying source code, the e-CNY adoption by Chinese and non-Chinese persons, and the extent of Beijing’s access to user and transaction data.
Several wide-reaching developments have been reported on the BSN cross-framework global infrastructure network like the “BSN Open Permissioned Blockchain Initiative” which is supposedly “the only legitimate way” for public chains such as Polkadot, Algorand, Cosmos, and Ethereum to enter China”. But no government or a top political figure of a major economy has publicly recognised the platform’s existence until now.
The senator’s letter comes as the joint research of the e-CNY linkage with Hong Kong’s Faster Payment System (FPS) since March last year is reportedly going to lead to the Chinese digital currency being used across Hong Kong soon, according to the South China Morning Post. The report says the pilot testing of e-CNY with FPS, which enables instant cross-bank and e-wallet payments with either a mobile phone number or an email address through any bank and e-wallet operator in Hong Kong, could start after the Chinese New Year which started earlier in February.
If it goes ahead as said, it will make the special administrative region the first offshore city to use the e-CNY outside of mainland China, an evidence of its cross-border capability and a first real example of its use in retail payment systems.