Digital yuan will offer best data protection

Chinese central bank: Digital yuan will offer best data protection

China’s central bank wants to offer anonymous digital yuan transactions with small amounts to protect anonymity to a „reasonable“ extent.

Chinese authorities want to provide the best protection for user data for the country’s central bank digital currency (CBDC), according to an official at China’s central bank.

Mu Changchun, head of the Chinese central bank’s digital currency research institute, spoke at the China Development Forum 2021 on Sunday about the data Bitcoin Victory protection capabilities of the digital yuan, according to local news agency Sina Finance.

Mu explained that a fully anonymous CBDC is „not feasible“ because a national digital currency must meet requirements related to protection against money laundering, terrorist financing and tax evasion. But that does not mean there is no data protection in China’s digital yuan, he asserted.

The bank uses what is called „controllable anonymity“

This is a key feature of China’s digital yuan. This means that the government provides certain tools to ensure the highest level of user privacy and financial security in conjunction with AML measures, Mu said. He stressed that telecom providers involved in the research and development of the digital yuan cannot share users‘ personal data and phone numbers with third parties, including the central bank.

E-commerce platforms, for example, also cannot access the personal data of digital yuan users because customers‘ payment information is encrypted in the form of a sub-wallet, Mu said. In addition, the digital yuan has many technical options to ensure data protection. These include identity anonymisation technology and a personal data protection system, as well as an internal control management mechanism. All of this in accordance with applicable Chinese laws, he adds.

To protect anonymity to a „reasonable“ extent, the central bank also plans to allow anonymous digital yuan transactions in small amounts, Mu explained. „With the digital renminbi, small amounts can be transferred anonymously, while large amounts remain traceable,“ the leader said.

„In short, user privacy through the digital renminbi is higher than other current payment methods,“ Mu concluded.

As we previously reported, many regions around the world, including the United States for example, consider data protection as one of the biggest problems of a CBDC. According to the European Central Bank’s public consultation on the digital euro, user privacy is the most requested feature for a European CBDC. This is followed by security and pan-European availability.