Amid growing reports of accelerated development around a digital yuan, Chinese President Xi Jinping’s related call last month for blockchain to become “core technology” in China made some cryptocurrency analysts warn of intensified surveillance ramifications in the country.
Now, an important official closely affiliated with the modernized yuan effort has added another wrinkle to the mix in implicitly contesting those warnings, having said the project will not be used to spy on Chinese citizens’ everyday purchases.
That’s per Mu Changchun, who directs the digital currency research wing at the People’s Bank of China (PBoC), the nation’s central bank.
Changchun, who formerly served as a deputy director for the payments division at PBoC and has likened the digital yuan project as akin to the Facebook Libra stablecoin, said in new November 12th remarks that the coming system would not disturb general privacy expectations in China:
“We know the demand from the general public is to keep anonymity by using paper money and coins … we will give those people who demand it anonymity in their transactions … But at the same time we will keep the balance between the ‘controllable anonymity’ and anti-money laundering, CTF (counter terrorist financing), and also tax issues, online gambling and any electronic criminal activities.”
“We are not seeking full control of the information of the general public,” Changchun later pointedly added.
The PBoC’s digital currency research director also reiterated previous assertions in saying that the digital yuan was meant to better ensure China’s financial independence, even if the country already has popular mainstream payments services. In September, Changchun noted:
“Why is the central bank still doing such a digital currency today when electronic payment methods are so developed? It is to protect our monetary sovereignty and legal currency status. We need to plan ahead for a rainy day.”
It Doesn’t Add Up, Skeptics Say
While clearly stated, Mu Changchun’s fresh comments will be far from enough to assuage skeptics’ concerns that the digital yuan will be aimed toward authoritarian ends, particularly with the surveillance overtones of the ongoing humanitarian crisis in China’s Xinjiang province as context.
One of those skeptics is Alex Gladstein, the chief strategy officer for the Human Rights Foundation and a Bitcoin advocate. Last week, Gladstein published an opinion piece in Bitcoin Magazine dubbed “In China, It’s Blockchain and Tyranny vs Bitcoin and Freedom,” wherein he expertly laid out the digital yuan’s worst case, dystopian scenario:
“Today, the Communist Party is forced to work with third parties like commercial banks and technology companies to control and understand the flows of money. In a future scenario with a successful digital yuan, the Central Bank itself could have a real-time understanding of where all the nation’s currency is and where it’s going. This kind of omniscient financial surveillance is a dictator’s dream.”
To be sure, the prospects for optimized domestic surveillance via a state-backed digital currency is most certainly not lost on the PBoC’s leadership. We can infer that from related work done by other central banks on the subject.
For instance, new reporting indicates the Bank of Canada recently held an internal presentation in which its researchers argued that a central bank digital currency could provide the conveniences of traditional payment rails while optimizing the ability to share information with regulators and law enforcement officials.
Notably, PBoC has been studying and working on the digital currency question for longer than any central bank in the world. If Bank of Canada’s internal analysts just formally settled on that position, it seems likely that PBoC researchers did years prior.
As the digital yuan progresses then, it will be important for the media and other stakeholders to track whether China takes a “watch what I say, not what I do” approach to privacy matters around the new yuan.