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China to get "Controllable Anonymity" in the finance sector

Digital Yuan is expected to be used as an alternative to cash in China

Shashank Bhardwaj
Published: Nov 2, 2022 02:17:18 PM IST
Updated: Nov 2, 2022 02:34:17 PM IST

China to get "Controllable Anonymity" in the finance sectorImage: Shutterstock

At Hong Kong Fintech Week, Chinese central bank governor Yi Gang talked about the progress of the nation's digital currency, called the digital yuan. He outlined the progress and adoption of the digital yuan and said that the currency is on track to be fully rolled out shortly.

Yi, during one of his speeches, stated that the digital yuan would be positioned as an alternative to cash in China. He added that privacy protection is a top priority for the Chinese government.

He explained the two-layer payment system would offer controllable anonymity to users. At the first tier, the central bank would supply digital yuan to authorised operators and process inter-institutional transaction information. At tier two, authorised operators only collect personal information necessary for exchange and circulation services. This ensures your privacy is protected while allowing access to the information you need.

Yi promised that data would be encrypted and stored. Personal sensitive information would be anonymised and won't be shared with third parties. Anonymity and privacy are important to many users, making anonymous transactions up to a certain amount possible. They also have specialised e-wallets to make it even easier. The central bank governor noted that anonymity can be beneficial and detrimental and must be dealt with carefully, especially in the financial realm. 

He further stated, "We recognize that anonymity and transparency are not black and white, and there are many nuances that need to be carefully weighed. In particular, we need to strike a precise balance between protecting individual privacy and combating illegal activities."

The governor's remarks echo those of Mu Changchun, head of the central bank digital currency (CBDC) program. In July, Mu reiterated that a CBDC does not need to be as anonymous as cash. He said a completely anonymous CBDC could help prevent crimes like money laundering and terrorism financing, and tax evasion.

Since launching its central bank digital currency (CBDC) program in 2014, China has expanded its reach to millions of retail customers. The program's success is due in part to its continuous development and expansion over the years. By 2022, the CBDC testing had expanded to some of the most populous provinces. By the third of 2022, yuan transaction volume crossed $14 billion, demonstrating the CBDC trail's significant reach.

Shashank is founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist.

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