China says a „completely anonymous“ digital yuan is „not feasible“
The country pioneered state-backed digital currencies and wants to introduce the digital yuan before the 2022 Winter Olympics.
The Chinese government wants to maximise privacy options in the upcoming digital yuan, the state’s native „Central Bank Digital Currency“ (CBDC), a report said on Monday (and China is getting bullish on Bitcoin).
Officially called the Digital Currency, Electronic Payment (DCEP), the Chinese digital currency is backed 1:1 by the yuan and is on Crypto Bull track to become the world’s first government-backed stablecoin.
Current products on the market, such as Tether and others, are run by private companies and are in most cases unregulated, Bitcoin (go to Plus500 buy bitcoin guide) is unregulated and trustless.
Does the digital yuan see me?
Last weekend, Mu Changchun, head of the People’s Bank of China’s Digital Currencies Research Institute, said so-called „controllable anonymity“ was an important feature in the design of the e-yuan.
However, he added that complete anonymity – as offered by private cryptocurrencies such as Dash and Monero – was „not feasible“ as CBDCs would have different reporting standards.
According to Changchun, large transactions would be monitored and tracked to prevent illegal transfers out of the country and maintain financial security. Moreover, complete anonymity would thwart the use of DCEP, i.e. money laundering, terrorist financing and tax evasion.
He added that „small transfers“, however, would remain untouched and „anonymous to a reasonable extent“.
Fears amid huge turnout
The comments come amid Chinese users sharing their concerns about the use of state-backed digital currencies. According to reports, users were worried about giving away too much information and revealing their spending habits.
But Changchun helped allay those fears. „When the digital yuan is used for a payment, personal information is encrypted in an electronic wallet before it is transmitted to an e-commerce platform. This prevents the e-commerce platform from accessing the personal information and protects privacy,“ Changchun said.
The PBoC official added that while telecom providers were also involved in the development of the DCEP, they are not allowed to share customer data from mobile phones with third parties such as the central bank under current laws and regulations.