China is promoting encryption techniques to go “all domestic” to insure financial security while paving the way to introduce the nation’s own digital fiat currency, according to an expert.
“The government needs to ensure that such techniques expected to be used in the future for the central bank’s digital currency are reliable and safe,” said Zhang Zhiheng, deputy head of the Institute of Data Communication Science and Technology, during the China Fintech Industry Summit on Tuesday.
The encryption techniques have been widely used in popular cryptocurrencies, such as bitcoins, which have recently reached a fevered pitch.
The encryption techniques help enable cryptocurrencies to ensure safety of transactions and provide anonymity totally absent in traditional banking, but these features are putting the brakes on so the government can realize authorized tracking, according to Zhang.
A fiat currency should have the capacity to protect customers’ privacy while ensuring the regulator’s access to oversee the system, according to Zhang.
“The bitcoin is very behind to become a government-issued fiat currency,” he said.
China is considering floating its own digital fiat currency and earlier this year completed a number of trials using digital fiat currency across some commercial banks.