(Kitco News) - Yi Gang, Governor of The People’s Bank of China (PBOC), spoke recently about the country’s progress in developing its digital yuan and indicated that the central bank was working closely with authorities in Hong Kong in its development.
During a speech at Hong Kong Fintech Week, Yi elaborated on the development of the e-CNY and how its adoption is progressing thus far, noting that the new currency is being positioned as an alternative to cash in China.
The main purpose of the e-CNY is to “meet the needs of domestic retail payment, enhance the development level of inclusive finance, and improve the efficiency of the currency and payment system,” according to the PBOC governor.
Yi also addressed concerns about privacy and stressed that “privacy protection is one of the issues top on our agenda. In designing e-CNY, we try to ensure privacy protection and financial security through by-and-large anonymity and managed anonymity.”
This is accomplished by employing a two-tiered system. The first tier involves the PBOC supplying the e-CNY to authorized operators and processing inter-institutional transaction information. The second tier involves authorized operators only collecting the personal information that is necessary for their exchange and circulation services to the public.
“Meanwhile, the PBOC ensures personal information security through advanced technology and strict management, with full adherence to consumer privacy protection laws and regulations,” Yi said. All transaction-related data is encrypted for storage, and sensitive customer information is “de-identified to non-transacting parties.”
Yi noted that while matters of privacy are important, the government must also “strike a delicate balance between protecting privacy and combating illicit activities.”
Users will be able to make anonymous transactions up to a certain amount, and they will be supplied with specialized e-wallets to conduct those transactions.
The PBOC is currently working in conjunction with the Hong Kong Monetary Authority and “other monetary authorities” to develop and launch the digital yuan. Yi indicated that the stated goal of the cooperation is to “better serve both global and domestic investors and help to enhance Hong Kong’s role as an international financial center.”
He closed his speech by saying that China would work towards increasing cooperation on the e-CNY with other monetary authorities and international institutions.
China originally started the digital yuan program in 2014 and launched its pilot program in 2019. Since that time, it has evolved to include millions of retail customers in the country and has expanded to some of the most populated provinces.
As of Sept. 13, the e-CNY total transaction volume for 2022 had surpassed 90 billion yuan, which equates to $15 billion.
