Controllable anonymity: China goes full Orwell on digital yuan

Here’s a beautiful turn of phrase from a Chinese central bank executive talking about its forthcoming national digital currency: “controllable anonymity.”

Spend a minute wrapping your brain around that Orwellian gem from the country that gave us the Social Credit Score.

It came from Mu Changchun, who heads up the People’s Bank of China (PBoC) digital currency research institute, at a conference in Singapore, Reuters reported on November 12.

“We know the demand from the general public is to keep anonymity by using paper money and coins,” Mu said. “[W]e will give those people who demand it anonymity in their transactions.”

He then qualified that promise.

“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,” said Mu. “That is a balance we have to keep, and that is our goal.”

So, you won’t be buying any Winnie-the-Pooh books on the down low with your digital yuan.

That balance doesn’t make sense, said Sonya Mann, communications manager of the Zcash Foundation, which supports the privacy-focused Zcash token (ZEC). 

“‘Controllable’ and ‘anonymous’ are fundamentally opposed,” Mann said. “[I]f someone is anonymous, that means you don’t know who they are at all. No identity, no contact info.”

Withdraw a $20 bill from an ATM, and previous users of that bill are completely anonymous to you, she noted. 

“So how are you going to go about controlling someone anonymous, someone you can’t identify and therefore cannot reach,” asked Mann. “It’s an oxymoronic concept.”

It’s also what you should expect when using a state controlled digital currency, said Douglas “Chowbungaman” Tuman, an advocate of privacy coin Monero and host of the Monero Talk podcast.

“There should be zero expectation of privacy,” Tuman said. “Especially when that state is China, and they suggest anonymity can be turned on and off as they deem necessary,” he added.

“China is clearly looking to build a surveillance coin,” he surmised.

Mu, of course, described the digital yuan in a different way.

“We are not seeking full control of the information of the general public,” he insisted. 

Which of course means the PBoC will be keeping at least some control of users anonymity so it can track that information.

“At the least, I’d conclude that PBoC would rather not be clear about the concrete privacy properties of the digital yuan,” said Mann.

That could ultimately be a good thing for Bitcoin, and especially for Monero, predicted Tuman. 

”Maybe this will even help spark the realization that monero isn’t a ‘privacy’ coin,’” Tuman said. “[R]ather, it’s just a true cryptocurrency that is designed to work as digital cash.”

The digital yuan, on the other hand, has the potential to “open eyes to what the true value proposition of cryptocurrency is,” said Tuman. “The core invention of cryptocurrency is digital cash—censorship resistant value transfer.”

Hopefully, he added, “it will even spark a more mainstream realization that while Bitcoin is not state controlled, it too has the potential to become a surveillance coin given its transparent ledger.”

Mann made the same point, noting that “bitcoin addresses are pseudonymous [her emphasis], not anonymous.”

That was made clear on October 15, when the IRS Criminal Investigations division announced othat its agents were able to break up one of the world’s largest child pornography darkweb sites by tracking bitcoin transactions back to a South Korean man’s server.
While that outcome was certainly laudable, it shows what FBI Director Christopher Wray told the Senate Homeland Security Committee on November 8. The agency now has tools “to follow the money even in this new world that we’re living in.”