Chinese central bank executive says digital yuan will provide 'controllable anonymity'

Chinese Digital Yuan is one of the first CBDCs whose pilot phase has expanded to include millions of users and billions in transaction volume.

China's central bank governor Yi Gang, in a recent speech during Hong Kong Fintech Week, spoke about the progress of his national digital currency called the digital yuan. He described the progress and adoption of the national digital currency.

During his speech, Yi noted that the digital yuan is positioning itself as an alternative to cash in China, a country with a strong digital payment infrastructure. He added that “privacy is one of the top issues on the agenda.”

He went on to describe the two-tier payment system that would provide controllable anonymity to users. At the first level, the central bank provides digital yuan to licensed operators and only processes information on inter-institutional transactions. At Level 2, Licensed Operators collect only the personal information necessary for their exchange and public dissemination services.

Yi promised that the data would be encrypted and stored and that sensitive personal information would be anonymized and not shared with third parties. Users can also make anonymous transactions up to a certain amount, and there will be specialized e-wallets to facilitate these transactions. The central bank governor noted that anonymity is a two-sided weapon and should therefore be treated with caution, especially in the financial arena and explained:

"We recognize that anonymity and transparency are not black or white, and there are many nuances that must be carefully weighed. In particular, we must strike a careful balance between protecting the privacy of individuals and the fight against illegal activities."

Yi's comments are in line with central bank digital currency (CBDC) program manager Mu Changchun, who in July reiterated a similar stance that the CBDC need not be as anonymous than money. Mu said that...