PBoC Says The Digital Yuan Will Offer Privacy For Small Transactions
After a huge state-wide debate about the potential privacy implications of the digital yuan, the People’s Bank of China (PBoC) has officially come out with its own comment about the security implications of the upcoming national digital currency.
According to the latest report from CPO Magazine, China’s national bank said that the digital yuan will allow anonymous transactions “in small amounts.” While its statement was meant to address the inherent contradiction between individual privacy protection and the government’s need for control when it comes to a national digital currency, it failed to satisfy the public looking for more concrete answers.
Many believe that the country’s immense effort to launch the DCEP was nothing more than a bid to divert its citizens from using cryptocurrencies that already exist on the market. While traceable, most cryptocurrencies obscure the identities of its users and offer protection from the prying eyes of the government. Others, on the other hand, believe that China’s move into the digital yuan represents a natural extension of its already widespread digital payment system. The country has been pushing strongly towards becoming a cashless state, aided by massive corporate efforts such as those coming from Tencent’s WeChat and Alibaba’s AliPay.
Therefore, it comes as a surprise that the country is willing to weave even the smallest portion of control over the upcoming digital yuan. Earlier this year, the People’s Bank of China and its digital asset arm said that anonymity was completely “off the table” due to strict regulations regarding terrorist funding, tax evasion, and money laundering. What it offers instead is a concept it called “controllable anonymity” that will provide some privacy protections to smaller-value transactions. However, no details about what the threshold for “small transactions” was or what the term “controllable” actually means.
What many believe is that the government most likely won’t give up much internal visibility into the digital yuan transaction records. It might, however, forbid telecoms operators from disclosing the phone numbers and personal data of users to any third parties. These third parties include the central bank itself, and even telecoms operators that explicitly participate in the development of the digital yuan would be subject to the rule.
This kind of controllable anonymity would essentially allow users to provide only a phone number in order to gain access to a digital yuan wallet and use the digital currency. Once users reach a certain deposit limit, they will be required to provide more personal information.
And while this represents a significant move for China and its strict privacy controls, it warranted negative responses from other countries. Jerome Powell, the chair of the Federal Reserve, said that any similar national digital currency will need to provide much better privacy in order to succeed as a legitimate payment method.