Security Alert About China’s Newly Launched Crypto-Yuan

  • The Crypto-Yuan has no privacy or anonymous option.
  • All transactions will be controlled by the Chinese government de-facto.
  • International businesses using it will be exposed to China gathering their information.

China launched their new Crypto-Yuan (BSN) on Saturday, April 25, in Beijing.  The event was attended by government officials and leaders of organizations that joined the initiative. These include the China Mobile Communications Project Institute, UnionPay payment network, mobile operators China Mobile, China Telecom and China Unicom, and Beijing Red Date Technology.

This is not a cryptocurrency in the literal sense of the word, since the growing demand for anonymity of transactions around the world is not met.

Using the digital yuan will increase the speed of cross-border transactions and make them cheaper, but it gives the Chinese government the opportunity to gain information on foreign nationals and foreign corporations and businesses. It is a very serious security issue.

The BSN platform is designed to simplify and reduce the cost of creating and deploying blockchain applications by companies. According to the official report, more than 2000 developers have tested the BSN platform in six months. Their work has resulted in applications for charitable donations, tracking products, and creating electronic invoices.

During the meeting, representatives of the platform reported that the BSN network currently has 128 public nodes. Seventy six of them are located in China, 44 are in the process of deployment, and another 8 are located outside of China in countries on all six continents. By the end of 2020, the number of nodes is planned to increase to 200.

With the launch of the main BSN network, developers will not have restrictions on deploying and updating applications that were active during the beta testing period.

Earlier, it became known that the platform plans to add support for public blockchain nodes EOS and Ethereum. This will expand the capabilities of the “blockchain as a service” and operational functionality for the platform’s clients. A blockchain is an immutable time-stamped series record of data that is distributed and managed by cluster of computers.

Crypto-Yuan will not work only on the blockchain, the issue will occur in two stages: from the Chinese Central Bank to commercial banks and from them it will be further introduced into circulation. Digital yuan will replace the monetary aggregate M0, and the payment system will be able to process up to 300 thousand transactions per second.

It will be impossible to withdraw Crypto-Yuan to take it out of China.

The Chinese digital currency project essentially concerns the issue of a stablecoin backed by the yuan. The stablecoin is a cryptocurrency fully backed by a traditional valuable asset. Stablecoins are cryptocurrencies designed to minimize the volatility of the price of the stablecoin, relative to some “stable” asset or basket of assets. A stablecoin can be pegged to a cryptocurrency, fiat money, or to exchange-traded commodities.

Basically it is a non-cash yuan with improved protection, with the preservation of the entire history of transactions between counterparties. This means that on the global scale and with foreign customers using it, all their information will be collected and immediately stored by the Chinese government.

Therefore, it is not exactly a traditional anonymous cryptocurrency as it is with Bitcoin for example. This is not a cryptocurrency in the literal sense of the word, since the growing demand for anonymity of transactions around the world is not met.

The advantages of the spread of digital currency are obvious. It will be possible to significantly simplify regular retail payments, improving the mobility of money. Clearing between banks will also be significantly simplified.

To make BSN attractive, because this “crypto” is Chinese government controlled, the transaction fee will be cheaper than with Bitcoin. The discount is the Chinese government’s gift to the foreign user to collect their information.

There are other positive aspects of the introduction of a digital national currency. It is no secret that you need to spend a lot of resources on servicing paper money. The spread of the digital yuan will reduce operating costs.

Also, it will be impossible to withdraw Crypto-Yuan to take it out of China.

We live in the digital world, but with Crypto-yuan is a serous security issue if used by foreign nationals and businesses.

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Christina Kitova

I spent most of my professional life in finance, insurance risk management litigation.

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