The head of the People’s Bank of China (PBoC), digital currency institute, stated that China’s central bank digital currency should not be anonymous like cash.
Mu Changchun, the lead of digital yuan projects, spoke about China’s CBDC project during the 5th Digital China Construction Summit held on July 24, local financial publication Sina Finance reported.
Mu stated that the Chinese central bank has not sought complete anonymity since the launch of the digital Yuan in 2020. The official said that PBoC had been working to allow only limited anonymity in conformity with global Anti-Money Laundering regulations.
Mu stated that the Chinese authorities should have access to CBDC data about people suspected of committing crimes. Official Mu stated that partial anonymity is an important aspect of the digital Yuan project, because it protects personal information and transaction privacy.
He added that a CBDC completely anonymous would hinder the prevention of crimes such as money laundering, terrorist financing, tax evasion, and other criminal acts.
Mu stressed that cash has a higher anonymity but is less mobile and easier to use for large amounts of money than digital currencies. “The inconvenience of carrying cash can increase friction for money laundering or terrorism financing.” Accordingly, cash anonymity is not tolerated by many,” the official said.
“The central bank’s digital money is more portable. It will facilitate money laundering and illegal transactions if it offers the same anonymity as cash. The central bank’s digital currency shouldn’t be as anonymous as cash.
Mu continued by stating that regulators could face “serious consequences” for focusing on privacy protection only and ignoring the financial crime risks. He said, “Freedom without restrictions is not true freedom.”
Despite not allowing anonymous online transactions, the PBoC is still working to protect the privacy of the digital yuan. Yi Gang, PBoC governor, stated that the digital yuan wants to be more privacy-enhanced and secure than payment apps.
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One of the most pressing issues in relation to CBDC projects around the world is user privacy. Regulators were left puzzled by how to protect digital privacy and track transactions to stop illicit financial activity.
The European Central Bank (ECB), in May, suggested that “CBDC without anonymity” be preferred to traditional digital payments such as bank deposits. This proposal was made shortly after the ECB acknowledged that digital euro designs lack privacy options.