Residents who received "red packets" of digital RMB use the money in a store in Shenzhen, Guangdong Province, on October 14, 2020. The city launched a pilot program to distribute 10m yuan ($1.49m) in the form of digital currency to residents on October 12, 2020. Photo: Li Hao/GT

Limited anonymity is possible for China's digital yuan, such as when transactions are in small amount, but complete anonymity is infeasible in reality and traces must be kept to recognize identity of the transaction for the sake of preventing crimes and violations, said Mu Changchun, director of the Digital Currency Research Institute of the People's Bank of China on Saturday at a forum.

According to Mu, allowing anonymity for certain transactions is aimed at protecting private information and public transactions, but it is also for the sake of preventing and cracking down on money laundering, tax evasion and terrorism financing.

Mu cited the example of Bitcoin, which is often used in drug dealing and trafficking because it is run under a completely anonymous mechanism. 

However, Mu stressed that the central bank has gone to lengths to ensure security of all digital yuan users. For example, operating institutions of digital yuan wallets are required to obey relevant Internet security laws and information security regulations in order to protect personal data. 

He also stressed that telecom operators are not allowed by current laws to reveal mobile phone user information to the People's Bank of China or other commercial banks; neither are they allowed to disclose customer information to other telecom operator partners. 

Mu stressed the digital yuan's data protection arrangements at a time when China is piloting digital yuan trials in a number of cities including Shanghai, Shenzhen and East China's Suzhou. 

According to media reports, the People's Bank of China and China Telecom have co-applied digital yuan hardware wallets for new-energy vehicle charging in Xiong'an New Area of North China's Hebei Province. 

Global Times