Privacy Protection a Top Issue for Digital Yuan: China's Central Bank Governor
Privacy protection is one of the top issues among the many still remaining when it comes to the use of China's central bank digital currency (CBDC), the digital yuan, according to China's Central Bank Governor Yi Gang.
"It is also important to keep in mind that anonymity and full disclosure are not as simple as black and white. There are many subtleties in between," Gang said during a virtual speech at Hong Kong FinTech Week. "Therefore, we must strike a delicate balance between protecting privacy and combating illicit activities."
The central banks and governments of several major economies around the world have signaled their intent to explore the development of a CBDC with an eye on China's lead on CBDCs.
The stress on privacy comes in a month when China's digital yuan, also known as the e-CNY, reached the milestone of 100 billion yuan (US$13.9 billion) in transaction volume. But that figure was a meager 14% increase from the end of last year, compared with its growth of 154% in the last six months of 2021. The e-CNY is being rolled out on a trial basis across the country in 23 cities.
While Gang emphasized the e-CNY is "mainly positioned as cash to meet the needs of domestic retail payment" to enhance inclusive finance and improve payment system efficiency, he stressed that the e-CNY has been designed to "ensure privacy protection and financial security through by-and-large anonymity and managed anonymity."
He explained that is accomplished via the fact that "transaction-related data is encrypted for storage," "entities and individuals are prohibited from arbitrary inquiry or information usage without rigorous legal authorization" and that China's central bank keeps "small-amount soft wallets and hard wallets to meet the need for small-value anonymous transactions, both online and offline."
However, the credibility of China's privacy promises comes under the shadow of its infamous propaganda efforts and governmental heavy-handedness, particularly during the 2021 crypto crackdown when it declared all cryptocurrency transactions and mining illegal.