With the impending launch of the digital yuan, data privacy is a topic of discussion that cannot be ignored. The director of the digital currency research institute of the People’s Bank of China stressed that anonymity cannot be guaranteed at all.
Seeking ways to prevent tax evasion and financial terrorism
In an interview with Securities Times, Ma Changchun said at the China Development Forum 2021 that a completely anonymous central bank (CBC) digital currency is not possible.
The reason, according to the official, is that the government needs to bring it in line with anti-money laundering (AML), know-your-customer (KYC) and terrorist financing (CTF) measures.
Such transactions should also be examined to prevent tax avoidance schemes by the future Chinese CBDC of the PBoC, the official said.
However, Ma stated that the digital yuan will include controlled anonymization technology.
Although he did not explain the concept of controlled anonymisation in detail, Mr Ma stressed that this is the type of anonymisation generally used to protect consumers’ right to privacy.
Role of telecommunications service providers
However, he explained how a digital yuan wallet can work with the KYC measures taken:
The worst performing wallet in terms of KYC is an anonymous wallet that can only be accessed using a mobile phone number. Of course, this type of wallet has the lowest balance and daily transaction limit, which can only cover the daily need for small payments. If you want to make larger payments, the wallet will need to be upgraded. The portfolio balance and payment limit increase with the intensity of KYC.
The director of the Digital Currency Research Institute also clarified the role that domestic telecom providers will play in the development of the digital yuan:
For example, although the payment departments of telecom operators are also engaged in research and development of digital RMB, current national legislation does not allow telecom operators to provide information on mobile customers to third parties. For example, the central bank. Of course, they don’t have to give it to departments that work with digital yuan. Therefore, wallets opened with mobile phone numbers are completely anonymous to the People’s Bank of China and its various operating companies.
What do you think of the controlled anonymization that the Chinese official mentioned? Let us know your comments in the section below.
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