China’s digital yuan: Beijing vows stronger laws, clear limits on monitoring e-CNY wallets
- Mu Changchun, head of the central bank’s digital currency research institute, says user data will only be tracked if a law is suspected of being violated
- e-CNY users can open four types of digital wallets, with daily transaction caps corresponding to how much personal information a user provides
China is moving to allay public concerns about data protection and privacy in using the digital yuan, vowing to implement clear laws concerning the monitoring of digital wallets.
The country is a forerunner in the development of a sovereign digital currency, known locally as the e-CNY, rolling out trials in 23 cities, including Beijing, Shanghai and Shenzhen since late 2019.
Central bank data shows about 4.6 million merchants now accept the digital currency and more than 261 million digital wallets have been opened. Transactions in pilot regions totalled 83 billion yuan (US$11.6 billion) by the end of May.
To ensure managed anonymity, we need to strengthen legislation and improve top-level design
“To ensure managed anonymity, we need to strengthen legislation and improve top-level design,” Mu Changchun, head of the People’s Bank of China (PBOC) digital currency research institute, wrote in the September issue of Modern Bankers magazine.
User information can only be analysed and monitored when transactions are suspected of violating laws concerning money laundering, terrorist financing or tax evasion, Mu said.
“We need to ensure there is a limited scope for user information to be used,” he said.
The design of e-CNY wallets is based on the principle of keeping small-sum transactions anonymous, but larger ones traceable, the official said.
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Users can open four types of digital wallets, with daily transaction caps corresponding to how much personal information a user provides.
The lowest value wallet, with a daily cap of 2,000 yuan (US$281), can be created with just a mobile phone number, which will not be shared by telecoms operators to third parties like the central bank.
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The PBOC drafted a legal amendment in late 2020 to legalise the digital yuan, though it still awaits lawmakers’ review and final approval.
“The digital yuan and physical yuan will coexist in the long run,” Mu said.
