The push around the world to introduce digital versions of cash – Central Bank Digital Currencies (CBDCs) – is most often promoted as a way to allow more people to gain access to financial services, but also as a convenience.
Opponents of these schemes, however, say there is nothing particularly “convenient” in having more potential for surveillance and tracking woven into yet another key area of life.
While this type of digital money does not bring any of the benefits of decentralized cryptocurrencies, one of the ways it differs from cash is that all transactions are done via a phone or a computer, and those invariably collect user data, to various degrees and of various kinds.
The issue of privacy – that is, specifically anonymity while using a CBDC – was addressed last week by China’s People’s Bank Governor Yi Gang, who told the FinTech event in Hong Kong that users of the Digital Yuan (digital renminbi, RMB) will enjoy something reports describe as “controllable anonymity.”
The conference heard that data will indeed be collected, but Yi promised this would be in line with the “minimum and necessary” policy – just so to allow the scheme, including digital RMB exchange and circulation services, to function.
In practice, this means that using China’s digital currency for shopping will be recorded – unless the amount involved is low. And so, different types of e-wallets will be on offer, one of the features being the ability to conduct low value transactions anonymously.
Yi’s explanation is that there needs to be a “precise balance” between privacy and what he termed as combating illegal activities. It would seem that any higher value transaction will be considered “guilty until proven innocent” in this context, revealing what it means to have “controllable” anonymity and privacy while using this CBDC.
Some reports covering Yi’s address are inferring that China might use the fight against illegal activities and corruption as an excuse for showdowns with political opponents, by means of monitoring and tracking their financial transactions.
For what it’s worth, Yi also promised that data collected from Digital Yuan users will be encrypted, not shared with third parties, while that which is sensitive will be anonymized.