China’s digital yuan is one of the CBDCs that has been put to the test quite early with millions of users and billions of dollars in trading volume.
In a recent speech at Hong Kong Fintech Week, the governor of the Central Bank of China, Yi Gang, talked about the advancement of their national digital currency (CBDC). He outlined the many advancements of adopting a national digital currency for a country’s payment system.
Yi Gang noted that the digital yuan is being seen as an alternative to cash in China, a country with a strong digital payment infrastructure. He added that protecting privacy is one of the top issues on the agenda.
The main advantage of the 2-layer payment system will be to provide controllable anonymity to the users. At level 1, the Central Bank provides digital yuan to authorized operators and only processes inter-institutional transaction information. At level 2, authorized operators collect only personal information necessary for their exchange and circulation services to the public.
The governor pledged that the data will be encrypted and stored, and that personally sensitive information will be anonymized and not shared with third parties. Users will also be able to make anonymous transactions up to a certain amount, and there will be dedicated digital wallets to facilitate such transactions.
However Mr. Yi Gang mentioned that anonymity is a lazy knife and therefore must be handled with care, especially in financial ream.
“We recognize that anonymity and transparency are not just black and white, there are nuances that need careful consideration. In particular, we need to strike the correct balance between protecting individual privacy and combating illegal activities,” he stressed.
This common view was echoed by the head of the central bank’s digital currency (CBDC) program Mu Changchun back in July. Accordingly, a completely anonymous CBDC would make it difficult to prevent crime. money laundering, terrorist financing, tax evasion,…
China started its CBDC program in 2014, and after years of development, the country officially launched the pilot program in 2019. Since then, the program has expanded to millions of retail customers across the country. country.
By 2022, the CBDC has expanded to some of China’s most populous provinces. The total trading volume of digital yuan can be estimated from the fact that it exceeded 14 billion USD by the third quarter of 2022.
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