Controllable Anonymity Is an Important Feature of CBDC – PBoC Official

Key Insights:

• Digital yuan guarantees privacy and personal information protection needs.
• The CBDC can be exchanged 1:1 with physical yuan and used to purchase anything that is bought by banknotes and coins.
• Only a few authorities can use the data when it is necessary to investigate suspicious transactions.

China’s digital yuan, the central bank digital currency (CBDC), has raised more concern about user privacy in the recent past. Experts argued that the digital yuan could give the jurisdiction significant access to data on citizens, further enabling state surveillance.

A senior official from the central bank called it a “misunderstanding” and clarified that the country fully respects privacy and personal information protection needs.

e-CNY collects less user information

Mu Changchun, head of the Digital Currency Institute at the People’s Bank of China (PBoC), responded to questions on the privacy concerns of the digital yuan during a forum in Fujian, China, on Sunday.

He emphasized that complete anonymity has never been considered for CBDC and that China would protect data related to digital yuan use, a local media report said. He noted,

“First of all, controllable anonymity is an important feature of digital RMB [e-CNY]. on the other hand, it also prevents and combats money laundering, terrorist financing, tax evasion, and other illegal activities.”

His remarks come as the country is moving steadily with pilot tests of the digital currency.

According to a Bloomberg report, the access to the limited information collected from people when using digital yuan is restricted. Furthermore, neither the central bank nor platforms that operate CBDC transactions would get all the trading information. Mu said,

“Authorities should only ask to use the data when it’s necessary to investigate transactions that are suspected of violating laws.”

Additionally, Mu stressed the “two-tier operation” system of digital yuan that ensures personal information cannot be inquired or used without legal authorization.

“Based on the design of the two-tier operation system and wallet matrix, digital RMB follows the principles of autonomy, transparency, and minimization, and collects necessary personal information directly related to the purpose of processing according to the wishes of users.”

However, users have the right to close these permissions anytime, and the digital yuan application would immediately stop the process of extracting personal information.

CBDC could purchase anything that banknotes do

Mu also denied the claim that e-CNY cannot be used to buy gold (XAU). He said digital yuan is legal tender in digital form, can be exchanged 1:1 with fiat currency, and can purchase anything that banknotes could buy.

“Banknotes and coins can buy gold and exchange foreign currency, so does digital yuan.”

A complete launch of he digital version of the yuan remains elusive as most of the population is already using mobile payment apps such as WeChat Pay and Alipay.

The PBoC’s CBDC pilot program has been expanded to 23 cities, covering almost one-fifth of the mass population. In March, the central bank expanded its pilot program to further cities, allowing residents to shop and travel in public transportation using digital yuan.

Mu emphasized that the “controllable anonymity” of the e-CNY would play a positive role in providing the public with better and more secure payment services.