{"id":941,"date":"2022-06-22T14:57:31","date_gmt":"2022-06-22T14:57:31","guid":{"rendered":"https:\/\/grandpascrypto.com\/?p=941"},"modified":"2022-06-22T14:57:33","modified_gmt":"2022-06-22T14:57:33","slug":"why-the-digital-yuan-scares-the-us","status":"publish","type":"post","link":"https:\/\/grandpascrypto.com\/why-the-digital-yuan-scares-the-us\/","title":{"rendered":"Why the Digital Yuan Scares the US"},"content":{"rendered":"\n

tl;dr Summary<\/strong>: Recent activity around the blockchain, the war in Ukraine, and the eCNY has sparked interesting questions about the global financial system and the United State\u2019s future influence over it. A bill proposed by the US Senate to ban eCNY has started a conversation around how the US plans to deal with future financial systems.<\/em><\/p>\n\n\n\n

At the end of May, US Lawmakers introduced a bill called \u201cDefending Americans from Authoritarian Digital Currencies Act.\u201d This act proposes the prohibition of China\u2019s digital currency payment system eCNY, the official digital payment system of the People\u2019s Republic of China. The eCNY or Digital Yuan represents one of many Central Bank Digital Currencies that are being piloted around the world and is an attempt by governments to leverage blockchain technology for their own purposes.<\/p>\n\n\n\n

While the proposed ban may seem insignificant the bill comes at an interesting time in the world when financial systems are weaponized during times of war. <\/p>\n\n\n\n

If you feel lost reading these first two paragraphs then don\u2019t worry cause you are not alone. Financial Systems, SWIFT, CHIPS, blockchain, sanctions, eCNY\u2026 and then layer all this with political posturing and jargon and you get a confusing mess. These systems are complex and the dynamics that govern them are even more so.<\/p>\n\n\n\n

In this article, we will break down key pillars of the global financial system, how they have been weaponized in the recent Ukraine war, and why the proposed Senate bill that bans eCNY might not be just about defending Americans against \u201cauthoritarian\u201d digital currencies, as the title suggests.<\/p>\n\n\n\n

How Does a Digital Transaction Work?<\/strong><\/h2>\n\n\n\n

To understand why the Digital Yuan ban matters we first have to talk about the current global financial system, how it works, and America\u2019s role in the system.<\/p>\n\n\n\n

If you think about any digital transaction, the systems that enable such transactions aren\u2019t limited to just you and the person you are paying. There are a number of intermediaries that are vital for such transactions to be facilitated. The parties involved in a digital transaction are as follows:<\/p>\n\n\n\n

  1. The Originator: person\/business that starts the transaction<\/li>
  2. The Beneficiary: person\/business to receive the funds<\/li>
  3. Originator\u2019s Financial Institution: financial institution or bank that receives the instruction from the originator and begins the messaging and release of funds<\/li>
  4. Beneficiary\u2019s Financial Institution: financial institution or bank of the beneficiary that receives the message and funds from the originator<\/li>
  5. Additional Financial Institutions: intermediaries that are needed to facilitate or pass along the message or funds to another institution.<\/li><\/ol>\n\n\n\n
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    China showcased the e-CNY at the Beijing Olympic and Paralympic Winter Games. This trial was to test the reliability of the #DigitalCurrency<\/a>.

    Recently, The e-CNY officially entered     #Hangzhou<\/a>\uff0c making the digital currency more accessible in daily life. #eCNY<\/a> #AsianGames<\/a> pic.twitter.com\/8nj25mAH0o<\/a><\/p>— 19th Asian Games Hangzhou 2022 Official (@19thAGofficial) June 22, 2022<\/a><\/blockquote>