Greater scrutiny and control of currency flow are things that the Communist Party of China would really like to achieve. Existing currency controls over the yuan seek to reduce the activity known as Chinese money smuggling, which has been problematic for the ambitions of financial regulators who want to boost the standing of the yuan on a global level. To this effect, the digital yuan project is already giving the Chinese government plenty of financial surveillance opportunities.
The United States is rightfully concerned about China trying to position the digital version of the yuan as a competitor to the American dollar, which is still the world's most dominant form of legal tender. For this reason, the Chairman of the Federal Reserve Bank met with the CEO of Coinbase and former Member of Congress Paul Ryan. The discussions aimed to ensure that the Bitcoin digital currency doesn't become an unpatriotic currency or a tool for the Chinese government.
This year, the Financial Crimes Enforcement Network (FinCEN) reported that the US has identified over $17.5 billion in Bitcoin transactions that are being laundered through the Chinese bitcoin economy. In this year's State of Bitcoin Report, FinCEN found that between July 2014 and October 2017, Bitcoin has received more than $17.5 billion in proceeds from foreign banks.
The Obama Administration's crackdown on the Chinese government has also created a significant challenge for the emerging digital currency ecosystem. For one, a Chinese law criminalizes trade and money laundering. This is an alarming blow to those in China looking to establish Bitcoin exchanges or use them for money laundering purposes; now that the Chinese government is controlling the digital yuan, regulators are trying to eliminate competition from cryptocurrency tokens because their decentralized nature could be a problem for the ongoing program.
The Obama Administration's efforts to shut down bitcoin exchanges in China were a direct attack on the digital currency market, but these efforts are now being conducted by Communist Party leaders. If Beijing successfully shuts off Bitcoin businesses, the digital yuan will flow more freely not only within China but also across Asia and around the world.