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Controllable Anonymity is an Important Feature of Digital RMB, Said People’s Bank of China

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Controllable Anonymity is an Important Feature of Digital RMB, Say's People's Bank of China

On the afternoon of July 24th, at the 5th China Digital Construction Summit held on the 23rd and 24th in Fuzhou, Fujian Province, Mu Changchun, director of the Digital Currency Research Institute of the People’s Bank of China, explained in detail the digital RMB and privacy and personal information protection issues that the market is more concerned about.

Mu Changchun, while attending a sub-forum on the development of the digital renminbi industry with the theme of “new kinetic energy and new track digital renminbi industry empowerment and new development” hosted by the Fujian Provincial People’s Government, delivered a speech to emphasize that controllable anonymity is an essential feature of the digital RMB.

“Controllable anonymity is an important feature of digital RMB. On the one hand, it reflects the positioning of M0 to ensure the public’s reasonable anonymous transaction and personal information protection needs; on the other hand, it also prevents and combats money laundering, terrorist financing, tax evasion, and other crimes. The objective needs to maintain financial security.”

Mu Changchun said in the speech that the digital renminbi is mainly positioned as cash in circulation (M0), that is, cash in digital form. The design should meet the reasonable needs of personal anonymous transactions and protect consumers’—user privacy.

Controllable anonymity is a crucial feature of the digital RMB, Mu Changchun said, noting it ensures reasonable anonymous transactions while maintaining the premises of meeting regulatory requirements such as anti-money laundering and anti-terrorist financing.

He said, “The digital renminbi “two-tier operation” system is conducive to ensuring that personal information cannot be inquired about or used without legal authorization.”

Controllable Anonymity is an Important Feature of Digital RMB, Say's People's Bank of China

The PBOC strictly abides by Cybersecurity, Personal Information Protection, and other laws and regulations. It ensures the security of personal information through advanced technical means and strict management mechanisms.

“Without legal authorization, neither the internal personnel of the People’s Bank of China nor any external unit or individual may inquire or use it at will; unauthorized inquiries or use of Personal Information will be investigated for legal responsibility according to law.” Said Mu Changchun

The two-tier operation system and wallet matrix of the digital RMB enables it to follow the principles of autonomy, transparency, and minimization. The digital RMB collects necessary personal information related to the processing according to users’ wishes.

Digital RMB only obtains necessary personal information directly related to the purpose of processing.

The digital renminbi app only collects and processes necessary personal information to ensure the realization of essential account functions such as registration, login, password modification, and retrieval; when operating agencies provide users with digital renminbi wallet services, they also only collect necessary identity information and transaction information to ensure that the realization of essential business functions such as digital RMB payment.

In addition, to ensure the safety of users’ property, Digital RMB only collects the information required for risk control to strengthen the risk identification of users’ digital RMB wallets and prevent risks such as theft, malicious loss reporting, and online fraud. In short, the protection of user privacy by digital renminbi is the highest among the current electronic payment tools.

The Need for Legislation on the digital RMB

The central bank’s digital currency collects less user information than traditional bank accounts and electronic payments and is more portable than physical cash. If the degree of anonymity is too high, it will provide new criminal soil for criminals, and many illegal transactions will flow into the central bank from electronic payments. Digital currency, which has become a tool for telecom fraud, online gambling, money laundering, drug trafficking, and even terrorist organization crimes, will also fail to meet the requirements of FATF and other international organizations.

“The central bank’s digital currency is more portable. If it provides the same anonymity as cash, it will greatly facilitate illegal transactions such as money laundering. Therefore, central bank digital currency should not have the same level of anonymity as cash.”

Mu, in his speech, said to ensure the effective implementation of the digital RMB controllable anonymity requirements, four corresponding arrangements must be made in the top-level system design. The first is to establish an information isolation mechanism; the second is to clarify the legal conditions for digital wallet inquiry, freezing, and deduction, the third is to establish a corresponding punishment mechanism, and the fourth is to improve the digital renminbi anti-money laundering, anti-terrorist financing, and other laws and regulations.

China’s Efforts to Launch a digital Stablecoin

China’s efforts are among the most advanced globally, and the country has been running various trials and pilot schemes of different payment scenarios in recent years.

Mu also said the digital RMB, which is the digital version of fiat currency issued by the PBOC, can be used to purchase anything that can be bought with banknotes and coins.

“Banknotes and coins can buy gold and convert foreign currency, so does the RMB,” he said.

In May, some cities distributed free digital cash to revive consumption and help businesses hit by pandemic curbs, with more RMB applications expected in the future to boost transparency and effectiveness of government policies.

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