Chinese Central Bank Reports Digital Yuan To Have Partial Anonymity

In a speech delivered by Central Bank Governor Yi Gang at the Hong Kong Fintech Week 2022, the People’s Bank of China (PBOC) executive gave insight into progress which has been made in relation to the country’s consistent work to implement CBDC into mainstream use within the financial and Chinese national banking infrastructure.

The main topic covered in the governor’s speech was primarily centered around anonymity, as details into the nature of the two-tiered system created by the Chinese banking system were revealed. The objective of the Chinese government and banks is said to not only address anonymity but also the secured, legal use of digital currency, in order to ensure safe monetary transactions. A reference made to cash was used multiple times to compare and make a case for a degree of anonymity which should be extended to citizens.

The Two-Tiered System Revealed

In the framework of his delivered message, Governor Gang gave details about the two-tiered system used to distribute, govern and manage the Chinese Digital Yuan (E-CNY). In the first aspect of the two-tier approach, the PBOC supplies the Digital Yuan to authorized operators. At this level, the only information shared exists between the PBOC and those specific authorized operators, which are said to only include inter-institutional transaction information.

The second tier of the distribution process solely governs transactions between authorized operators and members of the public. Governor Gang expressed that only personal information needed for exchange and circulation to the public is collected in that process, but with a level of encryption and legal protection that makes even that information protected and difficult to access.

Authorized Access Limited And Difficult To Obtain

The first layer of protection is established by encryption which is reported to protect personal data and information collected in the second tier of the operation during which authorized users to circulate and exchange E-CNY to the public sector. Beyond the encryption at use in the network, lawful access to personal information is said to require extensive legal measures that must be taken by the information requestor prior to authorization.

While personal privacy and security were said to be amongst the top priorities in establishing the framework for the currency, protecting against illegal use is also a priority, which is why total anonymity across the board is something that was avoided in the case of establishing the Digital Yuan transaction network and payment system. It was also revealed that soft and hard digital wallets would be created for the public to be able to use in small payments with complete anonymity as part of the overall implementation.

Next Steps In Preparing For International Integration

Governor Gang made it clear that the PBOC and governing authorities are working closely together with the Hong Kong Monetary Authority (HKMA) and other monetary authorities on CBDC. The cooperation is reportedly being exercised in order to serve global and domestic investors as well as strengthen Hong Kong’s role as an international financial center.

In his address, the governor alluded to the extensive diligence and care that has been exercised by the Chinese government in developing the best network infrastructure to support the circulation and management of the Digital Yuan. The address culminated with a declaration that the next steps are aimed at deepening cooperation on CBDC with additional monetary authorities and international institutions.

The governor also referenced data compiled by the Bank For International Settlements (BIS) taken in May. In the report, it is documented that 90% of the 81 respondent central banks have already begun developing CBDCs. Such references can almost assure that financial and government professionals and officials can be anticipated to be watchful for any blockchain news as it relates to further development of the CBDC ecosystem implemented by China.