Chinese authorities want to have a digital currency in widespread use, but privacy advocates worry about how much data they’ll be able to collect.
China’s central bank is currently conducting trials for its digital currency, which it hopes to have available for widespread use by the 2022 Winter Olympics in Beijing.
But many privacy advocates are alarmed at the amount of data that Chinese authorities will be able to collect through the new digital yuan, and the resulting potential for abuse.
WPR: By now, most everyone is familiar with cryptocurrencies like Bitcoin, which are decentralized. And of course, digital payments have become pretty much ubiquitous. But I think it’s fair to say that the concept of a central bank digital currency has yet to seep into the mainstream. So could you first enlighten us about how China’s new digital currency works — what it is and what it’s not?
Yaya Fanusie: As you said, people are used to Bitcoin and people know a lot about digital payments, because we all pay for things digitally. But a central bank digital currency is something a little bit different. Bitcoin is a decentralized digital currency that no one controls; it’s independent of any government and anyone can participate.
Digital payments, as we know them, basically involve private banking infrastructure where private banks have central bank money, and then they allow you to transact, but it’s really their infrastructure that you’re participating with. So, you have a relationship with that private bank. You don’t really have a relationship with the central bank.
But now, with the advancement of technology, governments see Bitcoin and are expressing interest in it, because Bitcoin solves some interesting problems around how to move value digitally. Central bankers also see that private companies are really involved in people’s commerce and everyday transactions.
This is especially the case in China, which has wanted to figure out a way to have a digital currency that was run by the central bank. So, not like Bitcoin, which is independent and decentralized.
Beijing was concerned about the digital payment space, which you may know is very big in China. The central bank has felt that private digital payment companies are way too powerful. So years ago…