China’s Chutian Dragon, a maker of high-end smart cards, plans to make a card-based wallet for the digital yuan with fingerprint identification technology from Norway’s IDEX Biometrics ASA, according to a statement from IDEX on Wednesday.
But a new wallet that requires its users’ fingerprints could strike a nerve among those concerned about privacy when using a central bank digital currency.
Chutian Dragon’s move is one of the many recent efforts from Chinese tech companies to support the mass adoption of the digital yuan. The AliPay-backed online payment services within the digital yuan mobile app have gone live, and all four major commercial banks in China already allow customers to pay for food delivery and online shopping services with their digital yuan apps.
Beijing-based Chutian has been a longtime provider of smart cards for Chinese government agencies and state-owned enterprises, such as telecom conglomerate China Mobile and UnionPay China. It has made card-based wallets to provide a hardware infrastructure for the digital yuan.
The collaboration between Chutian Dragon and IDEX is built on top of a license and commercial agreement in 2019, when the companies jointly developed secure payment cards, according to IDEX’s statement.
It is unclear whether the People’s Bank of China (PBOC), the country’s central bank, was involved in the collaboration. Last month, Chutian said only a small number of digital yuan cards have been made, noting that it hasn’t been able to mass produce the cards yet.
“There are still a lot of uncertainties in our businesses related to digital yuan, including research and development, production and marketing,” the company said at the time.
Shares of Shenzhen, China-listed Chutian Dragon have risen more than eight-fold since the company went public in March, reaching $2.7 billion market capitalization. The shares have hit a daily limit of a 10% increase in price in each of the last three days. China mandates that limit.
Chutian Dragon is hardly the only Chinese public tech company that is benefiting from China’s digital yuan push. The stocks of many payment technology startups have soared thanks to the digital yuan initiative.
The PBOC has introduced “controllable anonymity” for the digital yuan, which means users can make transactions anonymously to certain individuals or entities, but the central bank can still look through the data if the transactions are deemed suspicious or considered illegal. Larger amounts in the digital yuan account could also lead to less privacy.
U.S. Federal Reserve Chairman Jerome Powell has suggested a digital dollar should be better at protecting privacy than its Chinese counterpart. The Fed, however, hasn’t revealed any technical details on how its digital currency could be more private.
Some critics contend that the centralized nature of CBDCs means they can’t replace cryptocurrencies such as bitcoin in terms of security and privacy. In fact, CBDCs may provide central banks with a more efficient way to collect data from individuals, the critics say.