PBoC Official Explains Why Digital Yuan Won’t Be Fully Anonymous
Chinese officials are willing to ensure digital anonymity for the country’s central bank digital currencies (CBDCs), but only for a small class of transactions.
Total Anonymity of CBDCs Impossible
According to a local news outlet, an official of the People’s Bank of China (PBoC), Mu Changchun, has said that a completely anonymous digital yuan is not possible given the underlying regulatory measures, local state news media STCN reports. These include requirements related to anti-tax evasion, counter-terrorist financing, and anti-money laundering. He explained,
“ A completely anonymous central bank's digital currency is not feasible. It is an international consensus that the central bank's digital currency achieves anonymity on the basis of controllable risks.”
However, this doesn't mean the digital yuan won't cater to user's privacy and financial security.
Changchun said the digital yuan would provide more security and privacy than payment apps like AliPay and WeChat.
The bank official said the CBDC would work under a “controllable anonymity” that would protect the users' transaction details and personal information. This partial anonymity also means the central bank can monitor transactions for illicit activity while the parties involved remain private.
The first set of CBDC users will be able to open an account with just their mobile number. No further information would be required, and they would enjoy a level of anonymity for transactions. However, this limited surveillance would only be permitted for small-scale transactions.
If a digital yuan user wants to conduct substantial transactions, they would need to provide more personal details to unlock this feature. Changchun says China choosing not to cave into the rising outcry for a totally digital state-backed digital currency is based on international consensus among regulatory agencies worldwide.
The Chinese government has outrightly banned private cryptocurrencies in the country, instead opting for a state-sanctioned digital currency. This address by the head of the country's DCRI marks the first time the country has shared information on its CBDC program.
Changchun admitted that CBDCs would serve a dual role of being a financial surveillance tool to keep an eye on illicit transactions. According to him, total anonymity would see crimes like terrorist financing, money laundering, and tax evasion go unchecked.
The financial expert said that popular cryptocurrencies like Bitcoin were vetoed due to their propensity to support illegal transactions.
Crypto-related Crimes A Bane To Anonymity
The Chinese government has taken a firm stand against criminal elements operating under the pseudonymous canopy of cryptocurrencies to commit crimes. In a recent roundup of criminals, law enforcement officials have arrested several young men who allegedly used Bitcoin and USDt to launder illicit gains made from drug dealing and online gambling.
The government, which has cited these practices as a major reason for its firm stand against private crypto ownership, has gone as far as closing crypto exchanges in the country.
These recurrent money laundering and tax evasion themes have plagued fellow financial powerhouse-the US- from giving crypto a break. US regulatory agencies have become taciturn and combative, suing any crypto-facing company that it feels has broken any laid-down laws.
Even though the Federal Reserve (central bank equivalent) has since admitted that CBDCs use would feature in the economy, Fed Chief Jerome Powell said they would play a more secondary role to the US dollars.