The country pioneered state-backed digital currencies and plans to launch the digital yuan before the 2022 Winter Olympics.
The Chinese government wants to maximize privacy options in the upcoming digital yuan, the state’s native “Central Bank Digital Currency” (CBDC), a report said Monday (and China is getting bullish on Bitcoin).
Officially called Digital Currency, Electronic Payment (DCEP), the Chinese digital currency is backed 1:1 by the yuan and is on track to become the world’s first government-backed stablecoin.
Current products on the market, such as Tether and others, are operated by private companies and are unregulated. In most cases, Bitcoin (go to Plus500 Buy Bitcoin Guide) is unregulated and trustless.
Last weekend, Mu Changchun, head of the People’s Bank of China’s Digital Currencies Research Institute, said that so-called “controllable anonymity” was an important feature in the design of the e-yuan.
However, he added that complete anonymity – as offered by private cryptocurrencies such as Dash and Monero – was “not feasible” because CBDCs would have different reporting standards.
According to Changchun, large transactions would be monitored and tracked to prevent illegal transfers from the country and maintain financial security. Also, complete anonymity would thwart the use of DCEP, i.e., money laundering, terrorist financing, and tax evasion.
He added that “small transfers,” however, would remain untouched and “anonymous to a reasonable extent.”
The comments come amid Chinese users sharing their concerns about using state-backed digital currencies. Reportedly, users were worried about revealing too much information and giving away their spending habits.
But Changchun helped allay those fears. “When digital yuan is used to make a payment, personal information is encrypted in an electronic wallet before it is transmitted to an e-commerce platform. This prevents the e-commerce platform from accessing personal information and protects privacy,” Changchun said.
The PBoC official added that while telecom operators were also involved in developing the DCEP, they are not allowed to share customer data from cell phones with third parties such as the central bank under current laws and regulations.
DCEP has been in a trial phase since mid-2020 and has proven itself in cab and food delivery apps, grocery stores, real estate, and other everyday service markets. Reports from last year even suggested that DCEP had reached over $160 million in volume within weeks of trials.