What’s new: Privacy protection is one of the most important issues in the development of China’s digital yuan, also known as the e-CNY, the country’s top central banker said.
Through a two-tier operation and controllable anonymity, the People’s Bank of China (PBOC) designed the digital yuan to simultaneously protect personal privacy and maintain financial security, PBOC Governor Yi Gang said Monday in a speech at the Hong Kong FinTech Week conference.
In the digital yuan operating system, the central bank processes inter-institutional transactions as the first tier and does not deal with individual transaction information, Yi said. In the second tier, designated operating institutions collect personal information based on a “minimum necessary” principle and provide digital yuan exchange services to the public, Yi said.
All transaction data is encrypted, and sensitive personal information is anonymized and isn’t visible to third parties. Without full legal authorization, no entity or individual is allowed to inquire or use personal information, Yi said.
“Anonymity and transparency are not as simple as black and white,” Yi said. Officials must strike a delicate balance between protecting privacy and combating illicit activities, he said.
The background: China has rolled out a pilot program to test the digital currency’s functions, applications and reliability. The program has expanded to cover 23 cities and regions.
As of the end of August, about 360 million e-CNY transactions worth more than 100 billion yuan ($13.7 billion) were completed in pilot areas, with more than 5.6 million merchants accepting payment with the digital currency, according to a paper released by the central bank’s Digital Currency Institute.
This year, localities have launched dozens of campaigns to bolster consumption while promoting the digital yuan. Authorities also allowed residents to use the digital currency to pay utility bills and collect tax refunds and health insurance reimbursements, according to the paper.
But criminals have taken advantage of insufficient public awareness to conduct telecom scams involving the digital yuan, a senior PBOC official warned in September.
Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bob.simison@caixin.com)
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