The digital yuan needs more private data from users who carry out more significant transactions. This method consolidates this bank as the most intimate among the payment platforms currently available.
As an intention to commit with international regulations against money laundering and terrorist financing, the central bank of digital currencies cannot be completely anonymous. Mu Changchun, which leads the Digital Currency Research Institute of the People’s Bank of China, highlighted this decision when discussing privacy and the digital yuan.
During his active stance in the China Development Forum this month, the official said that the digital yuan works with a design of “controllable anonymity.”
With this controllable anonymity, the director meant that the CBDC does not focus on citizens’ privacy, considering that the country runs the risk of paying a high price to the detriment of the fight against crime, according to digital media.
Changchun also assured that China’s CBDC offers the highest protection of user privacy among currently available payment platforms.
China and the Structure of its Payment Systems
The director makes this comparison because of the structure of China’s payment systems, WeChat and Alipay, connect to traditional bank accounts that need user data to work. Simultaneously, the digital yuan closely relates to the banking platform, allowing small anonymity chunks, as the director commented.
The executive added that the digital yuan wallet has two levels of “know your customer” requirements, known by its acronym KYC.
When carrying out significant transactions, users need to enter their private data to follow up on possible suspicious operations. “If you want to make large payments, the portfolio needs updates to increase the payment limit, as the intensity of KYC increases,” The director said.
The Digital Yuan Cannot Protect the Right to Privacy
Concerns around private data tied to the digital yuan platform are not new to China. Citizens have been expressing their concerns in each pilot test that the government has launched.
These concerns have also appeared as a highlight in a report recently published by The Wall Street Journal. The director points out that China’s central bank will have the power to track the digital yuan nationally among citizens who use it and foreign companies operating in the country.
As China moves forward by testing the digital yuan in various cities, including Shanghai, Shenzhen, and Suzhou, fears also grow that the new payment system will become a new state control system.
The central bank reported that, as the country becomes a cashless society, it hopes that digital will be the new norm for transactions, which would open new alternatives to gain control over supplies.
By: Jenson Nuñez
