Even Before Launch of Digital Yuan in China, Fraudsters are Beginning to Probe for Weaknesses

In China, the digital yuan is getting ever closer to a widespread, national rollout.

And, so, as might logically follow … the fraudsters are testing things out a bit, looking for vulnerabilities.

Ledger Insights, in turn citing Chinese language site The 21st Century Herald, reported that while the central bank digital currency (CBDC) is in pilot phase, there have been some (isolated) incidences of fraud.

Generally speaking, noted the site, thus far the fraudsters’ efforts are “similar” to scams that have typically targeted debit and credit cards. Among the examples detailed: A target was told by fraudsters that an item that had been bought was defective, and upon its return could be refunded — but was lured into making a CBDC payment using his digital wallet. As many as 11 individuals were arrested in the scam, and have been linked to a Cambodian money laundering scam, as reported by Ledger Insights.

Separately, a woman was lured to provide information associated with her identity and those details were used to open a digital yuan wallet, and to use those details, too, to steal funds from her account.

Now, these are but two incidents reported amid a rollout that has involved, and will involve, hundreds millions of people.

As reported earlier this month, as many as 140 million individual accounts and 10 million commercial/business accounts have been using the digital yuan with the value of the transactions to date across the pilot programs touching about $9.7 billion.

Read here: China’s Central Bank: 10M Businesses, 140M People Using Digital Yuan

As it stands now, operators of the digital yuan can open four different types of eWallets for customers, Bloomberg reported. The “least privileged” type only needs a phone number, but it has transaction caps. The “highest privileged” eWallet has to be established in person by a holder — at a brick and mortar  bank counter with personal identification-related information.

The central bank has stated that that it will keep data private unless the law mandates disclosure, and here, we contend, the door opens a bit for less anonymity.

Controlled Anonymity   

The e-yuan operates through a principle known as “controlled anonymity,” (which the government of course controls) and the data is in fact stored with the government. It’s conceivable that, should the government view a rising threat in the form of schemes such as the ones listed above, more data will need to be collected, and examined. It’s conceivable too, that even the lower-threshold transactions will be more widely and closely monitored, which means privacy, more or less, is subject to whim.