How do you define national security? An important question as China continues its CBDC push

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Recent reports note that Wang Jingwu, vice president and chief risk officer of the Industrial and Commercial Bank of China, wrote a white paper that details for the China Financial Journal the necessary laws he believes are required for the country’s CBDC.

He pleads for a legal project which has been described as having to “clearly define[e] and outline[e] acquisition, use, risk, privacy, control and other details that clarify its nationwide operation…”

Functionally, there is no doubt that any central bank digital currency must have such set regulations and characteristics. However, the devil is in the details. Does the mere fact that there is a clearly defined privacy policy mean that the policy will stand the test of time? Are there checks and balances to ensure that private financial data is not compromised by an authoritarian regime?

Jingwu said,

“Currently, the digital renminbi is not regulated at the level of laws and regulations, and there is a lack of legal safeguards regarding the acquisition, use, risk prevention and control of the digital renminbi. With the expansion of circulation of the digital renminbi, there is an urgent need to provide strong protection through legislation.

While it is true that protection must be codified, protection has value only if it actually protects. The People’s Bank of China can track the digital yuan throughout its life cycle in circulation -so, also, operating agencies can follow the chain. We must ensure that CBDCs do not cede control of our financial system to governments, especially those with a history of authoritarian rule.

Jingwu aims to “clarify the limits of digital renminbi privacy protection” and ensure that personal data “can only be used for national security purposes.”

He is a privacy advocate who agrees that there must be an exclusion for national security purposes. As we have learned throughout history, the term “national security” has sometimes been used as a catch-all, giving the government enormous power and trampling on the privacy rights of individuals.

There are, indeed, many other questions that need to be resolved before a CBDC can be launched on a large scale. What happens if a supplier encounters technical problems? How do you define its legal status? Which parties are responsible for distribution? These are just a few valid considerations.

But paramount to all these things, a simple question rises to the top What guarantees do citizens have that their consumption habits and transactions will not be tracked? Money represents economic freedom. This means you can use your assets however you want privately. We have laws that we must respect, of course. But money represents freedom. Freedom of movement and relocation. Freedom of choice of vendors and suppliers. Freedom to live serenely and in complete privacy.

A recent ATMIA white paper noted that,

“[I]n a survey conducted by the Boston Consulting Group (BCG), 9 out of 10 people consider financial data and payment card usage data to be private. Fifty percent consider information about their location, internet usage, email, purchase history and social media usage to be mostly private.

While the stated interest of some governments may be to track payments to limit the underground economy, Friedrich Schneider’s research has been summarized to note estimates that “eliminating cash would only reduce the economy underground only two to three percent”.

CBDCs could be used to force a population into a financial world without privacy. It’s a world we don’t want to live in, and the slope couldn’t be more slippery. It is for this reason that, although Jingwu’s comment seems positive, the actual execution is much more important than the sound bites. We must take the utmost care to preserve our financial freedoms.

Richard Gardner is the CEO of Module. He has been a globally recognized subject matter expert for over two decades, offering intricate insights and analysis on cryptocurrency, cybersecurity, fintech, surveillance technology, blockchain technologies, and management best practices. general.

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