A high-level official of the People’s Bank of China (PBoC) has revealed that a completely private digital currency is not an option for the bank based on international recommendations.
Digital Yuan will feature Controllable Anonymity
Mu Changchun, the head of the PBoC Digitial Currency Research Institute, revealed this in a forum on Saturday. According to Mu, a fully anonymous CBDC is not practical, and the bank will deploy a system known as controllable anonymity.
“The precondition of CBDC’s anonymity is it being risk-controllable and limited. Any design that doesn’t satisfy anti-money laundering, anti-terrorism financing, and anti-tax evasion purposes will be simply vetoed,” he said.
He explained that the digital yuan’s controllable anonymity mechanism means that privacy will only be applied when end users transact within themselves. All details of transactions will remain open to the central bank and financial regulators.
Mu further stated that focusing on making the digital yuan completely anonymous will pose problems for regulators to monitor criminal activities. He cited the wide use of bitcoin and Tether (USDT) by criminals for money laundering.
China has taken a tough stance towards cybercriminal activities in recent years, making regular crackdowns. The justice department has sentenced more than 100 people to various prison terms for laundering proceeds using USDT via OTC exchanges.
The statement from Mu suggests that the Digital Yuan will be used as a financial surveillance tool by the Chinese government. It is also the first time that the PBoC will provide added insight into the digital currency functions.
Central bank digital currencies will always face skepticism from the crypto community due to centralization features. Apart from the price increases in cryptocurrencies, a significant reason for the growing use is their anonymous features.
The centralized nature of CBDCs could hinder adoption since governments will have more information about transactions than they can access with the current financial system.
Digital Yuan Continues to Gain Steam
China has continued to forge ahead with the digital yuan’s development with the launch likely to occur before the end of the year. The Asian nation is looking to take the first-mover advantage and has been proactive in the development of its digital currency.
Several airdrops testing was performed in several cities, including major hubs like Beijing, Suzhou, and Shenzhen. There has also been a rush to develop other utilities for the digital currencies, with the Chinese Commercial Bank recently testing a biometric hardware wallet in February.
Published at Mon, 22 Mar 2021 17:00:29 +0000