In a recent address at Hong Kong Fintech Week, Yi Gang, the governor of the People’s Bank of China, discussed the development of their national digital currency, the digital yuan. He gave an overview of the adoption and development of the national digital currency.
Yi pointed out during his address that the digital yuan is being promoted in China, a nation with a strong digital payment infrastructure, as a currency substitute. “Privacy protection is one of the top of the issues on our agenda,” he continued.
He continued by outlining the two-layer payment structure that would give consumers manageable anonymity. At tier one, the central bank exclusively manages inter-institutional transaction data and provides digital yuan to authorised operators.
Yi pledged that data would be stored encrypted and that personally identifiable information would be de-identified and kept private. There will be specific e-wallets to make those transactions possible, and users can also make anonymous transfers up to a certain amount. Anonymity, according to the governor of the central bank, is a double-edged sword that must be handled carefully, particularly in the financial realm.
His remarks are in sync with those of Mu Changchun, the chief of the central bank’s digital currency (CBDC) programme, who maintained a similar position in July, saying that CBDC doesn’t have to be as private as cash. A CBDC that was fully anonymous, according to Mu, would make it more difficult to stop crimes like tax evasion, money laundering, and financing for terrorism.
After years of research, China began its CBDC programme in 2014 and debuted the pilot in 2019. Millions of retail consumers nationwide now benefit from the program’s expansion since that time. The CBDC testing has been extended to several of the provinces with the highest populations in 2022. The fact that the total volume of digital yuan transactions exceeded $14 billion by the third quarter of 2022 can be used to estimate the size of the CBDC trail.