Chutian Dragon Co. Ltd., a leading Chinese designer and producer of high-end smart-cards, in cooperation with Norwegian biotech company IDEX Biometrics ASA (OSE: IDEX and Nasdaq: IDBA), plans to build a new version of the digital yuan wallet to provide greater security via fingerprint ID, according to IDEX Biometrics.
But the initiative has also awakened privacy concerns related to China’s new central bank digital currency, officially named e-CNY but also colloquially called DCEP or digital yuan. China’s central bank, the People’s Bank of China, has not yet officially launched e-CNY but is currently testing it out across the country on millions of citizens via mobile phones, ATMs and hardware wallets.
Biometrics meet digital yuan wallet
“IDEX’s advanced fingerprint sensors and biometric technologies are already qualified for the card environment and are well suited for payment card-based contactless transactions,” said Susan Su, Chief Executive Officer of Chutian Dragon, in the press release.
Listed on both Nasdaq and Oslo stock exchanges, IDEX Biometrics ASA is a biotech company providing fingerprint sensors and biometric solutions for smart cards and devices. A fingerprint sensor embedded in the smart card, especially for the touch-free payment card, adds another layer of safety for the card without passwords.
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In October 2019, Chutian Dragon entered a worldwide license agreement with IDEX Biometrics ASA. According to a company statement, Chutian Dragon will be able to use “certain IDEX patents to develop, manufacture and sell on-card enrolment devices.”
Based in Beijing, Chutian Dragon is one of Asia’s largest smart-card manufacturers that provides smart-card research and development services. It has provided social security cards, bank cards and mobile SIM cards for China’s government, banks and mobile service operators.
The digital yuan hardware wallet with a fingerprint scanning function is the latest development arising out of China’s “Digital Currency, Electronic Payments” (DCEP) project that is now seven years in the making. China’s largest companies, including tech giants JD.com and Ant group, are deeply involved. China’s commercial banks also recently unveiled prototype ATMs that can convert a foreign visitor’s foreign fiat money to e-CNY.
Concerns about security and privacy
Responding to investors’ queries about digital yuan wallets, Chutian Dragon said the company “has a certain amount of technical accumulation on a digital RMB hardware wallet and has produced a small number of related products.”
In response to another inquiry about the company’s participation in research and development related to the digital yuan, Chutian Dragon denied it has any direct involvement with e-CNY – it simply designed one of the carriers of e-CNY, which is the digital yuan hardware wallet.
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Chutian Dragon touts the card-like wallet as something that help provide inclusive financial services to millions of unbanked and underbanked people in China who do not have a mobile phone or easy access to the internet, while its fingerprint authentication adds another layer of security.
Others believe the biometric data collection can also help strengthen China’s monitoring and ultimate control over its future CBDC.
The public has already been warned. Mu Changchun, director of the Digital Currency Research Institute of China’s central bank, already announced earlier this year that e-CNY would not be 100% anonymous. The digital yuan will offer “controllable anonymity” with tiers of complexity based on the degree of KYC (know your customer) needs.