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Why China's New Digital Currency Raises Privacy Concerns | WSJ - YouTube
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(playful music)
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(speaking in foreign language)
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(cashier beeping)
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- [Narrator] Huang Dan just
paid with a new type of money
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at this pharmacy.
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(speaking in foreign language)
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- [Narrator] That's
because China's paper cash
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is going digital.
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(speaking in foreign language)
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- [Narrator] The digital yuan is meant
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to be faster than using
credit or debit cards
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on digital wallets like Apple Pay.
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(phone dinging)
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Plus there are other incentives,
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like zero transaction fees for merchants
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and one day, it'll even work offline.
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But one major difference
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is that the digital yuan is 100% trackable
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by China's central bank
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and when it's launched nation wide,
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it could impact not only citizens
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but also foreign companies
operating in the country.
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- The central bank will know who's paying,
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how much they're paying,
when they're paying,
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where they're paying
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and then to analyze the
patterns of payment.
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- [Narrator] China's central
bank has also said it plans
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to gradually replace all cash and coins
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with the digital yuan.
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The country would be
the first major economy
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to introduce a digital
currency in the real world.
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And while many users say the
digital yuan is easy to use,
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China's money revolution could
usher in privacy concerns.
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(speaking in foreign language)
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- [Narrator] Using the phone to pay
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isn't a new concept for Huang
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since he's one of about 770
million mobile payment users
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in China who rely on digital wallets
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like Ant Group's Alipay
and Tencent's WeChat Pay.
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These private tech firms
hold data on transactions,
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which the government can access.
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But because the digital yuan is developed
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by the central bank,
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there are no third-parties
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and that data sits with the government.
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(speaking in foreign language)
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- [Narrator] To begin testing
the digital currency online
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and in physical stores,
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last year, the Chinese central bank
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started dolling out digital cash
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through public lotteries
in cities across China.
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Huang is one of the 750,000 people
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who have won some piece
of the $23 million prize
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in the past year.
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To start spending his
$30 worth of winnings,
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Huang first downloaded
the digital yuan app.
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(speaking in foreign language)
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- [Narrator] It recorded
that he spent money
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on lunch and medicine
one Saturday afternoon
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in the southwestern city of Chengdu.
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(speaking in foreign language)
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- [Narrator] About 10,000
merchants in Chengdu
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have signed up to accept digital yuan.
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(speaking in foreign language)
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- [Narrator] Zhong Jiaying
manages a dumpling restaurant
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and she said the digital yuan
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has some advantages compared
with other payment options.
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(speaking in foreign language)
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- [Narrator] For instance, two of China's
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most popular digital wallets
charge merchants an average
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of .6% for every transaction.
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There's also another upside in the works.
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The central bank is planning
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to make transactions possible
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even without an internet connection.
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So restaurants like
Zhong's won't have to worry
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about their spotty connections
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that sometimes make it hard to
process digital transactions.
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- This digital yuan is less about money
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and more about data.
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- [Narrator] Yaya Fanusie
is an adjunct senior fellow
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at the nonprofit think tank
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Center for a New American Security
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in Washington, D.C.
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He's been studying digital currencies
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for the past six years
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and he says China's new currency
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is not as anonymous as it claims.
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- The central bank has talked
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about there being controllable anonymity,
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which really means it's
anonymous horizontally, right?
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The users that are using
it don't necessarily know
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the identity of everyone
that they're interaction with
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but vertically, it's not anonymous.
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The central bank is at the top
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with information on all the users.
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- [Narrator] China's
central bank has promised
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to protect users' privacy.
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For now, people can
choose whether they want
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to use the digital currency.
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But the central bank has said
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that as the country
becomes a cashless society,
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it expects the digital yuan
to become the primary way
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to make transactions.
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- The Chinese government
could force Chinese companies
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to only accept payment in digital yuan,
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which would then force
the foreign companies,
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their foreign counterparts for trade.
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It could ensure that
they have to use that.
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- [Narrator] Central banks have authority
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to control money supply
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but their actions to
restrict a digital currency
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would have a more immediate effect,
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leaving companies holding that currency
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all the more vulnerable.
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For example, Fanusie
says China's central bank
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have put an expiration
date on the digital money,
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similar to how lottery
winnings have to be spent
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before a certain date.
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- It means that the Chinese government
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could set up a whole lot of things
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to have your currency maybe valid
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or invalid based on its own priorities.
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This is almost like handing over the keys
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to your business or to
your finance department
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in some ways
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because you really can't control what,
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at the end of the day,
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may happen with the funds
that you're holding.
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- [Narrator] While there
are privacy concerns,
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Fanusie says digital currencies
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can create more efficient monetary policy
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and counter criminal activities.
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China's central bank said
its digital yuan system
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would help combat money laundering,
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gambling and terrorism financing.
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(speaking in foreign language)
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Meanwhile, the central
bank is also looking
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into ways to make international
transactions possible
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in digital yuan.
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And Fanusie says there's a big variable
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that'll determine if that's going to work.
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- Will foreign governments
allow their businesses
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and citizens to hold
digital yuan and use it?
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It's not a given that all other countries
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are going to transact with this
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and because of the
privacy, the data issues.
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So this is really to be determined.
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- [Narrator] While there's no set date
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for a national rollout,
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some officials have said
the digital currency
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could be ready for wider use next February
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during the 2022 Winter
Olympics in Beijing.
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- I think there is an
element of showing off
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for the big international audience.
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We have a central bank digital currency
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that we're using.
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We're the biggest country that's doing it.
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- [Narrator] And China isn't
alone in this experiment.
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According to one survey of central banks,
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86% of them from the US to Japan
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are exploring these types of currencies.
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For early digital yuan winners like Huang,
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he says the trial went smoothly
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and if the currency does go mainstream,
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he expects the surveillance
aspect will matter less to him.
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(speaking in foreign language)
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(lively music)
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