“Controllable anonymity” (可控匿名, kěkòng nìmíng), also translated as "managed anonymity" in some Chinese government sources, is a defining principle of the People's Bank of China's (PBOC's) "digital yuan" (or e-CNY) initiative.

The phrase attempts to resolve a central contradiction within the e-CNY  project (a contradiction likely to be present in other central bank digital currencies as well). While intended to be cash-like in certain respects, the digital yuan is designed to give the central bank a level of visibility and control that real cash doesn’t offer.  

Context and Translation

Translation of this term into English is relatively straightforward: 可控 (kěkòng) means “controllable” and 匿名 (nìmíng) means “anonymous” or, literally,  “concealed name.” 

Explanations from PBOC officials, as well as the established usage of “controllable” in Chinese technology policy discourse (see “Associated Terms” below), make clear that “controllable” here connotes control by a central authority, rather than the individual. The alternative translation of "managed" for 可控 should be taken seriously, as it is used by the PBOC itself in its English-language July 2021 white paper, but it does not reflect the Chinese-language connotation of the term as directly. 

Chinese officials have commented at length on the meaning of  “controllable anonymity.” Of particular note are remarks delivered by Mu Changchun, director of the Digital Currency Research Institute at the PBOC, at the China Development Forum in March 2021, in which he broke down his understanding of each component of the phrase.

Anonymity (匿名)

Mu made clear that the degree of anonymity allowed to an e-CNY user (insofar as one is willing to consider shades of anonymity) will depend on transaction size. A slogan associated with the e-CNY project and used by Mu during his remarks, “小额匿名、大额可溯” (xiǎo é nìmíng, dà é  kěsù), means “small amounts are anonymous, big amounts are traceable.” Small transactions, Mu said, would require that consumers have an active phone number linked to their account. He referred to this type of phone number–associated wallet as an “anonymous wallet.” In reality, these small transactions are still not fully anonymous. Since 2010, the Chinese government has required that phone numbers be linked to a government-issued ID. However, Mu said new Chinese data protection laws would prevent carriers from sharing personally identifying information with external parties, including the PBOC. Therefore, he said, “from the perspective of the PBOC and e-CNY operating institutions, wallets opened with a phone number are completely anonymous.” 

However, Phone-number-only wallets allow a single-transaction limit of 2,000 RMB. Expanding this limit requires associating additional identifying information with an e-CNY wallet, such as a photo and an ID number, with larger limits or unlimited accounts requiring more information.

Mu explained that “anonymity” also refers to anonymity afforded by the e-CNY with respect to the counterparty to a transaction. In contrast to using a bank card or existing mobile payment system to make an online transaction—whereby a vendor receives some identifying information about a consumer—Mu said that the e-CNY encrypts payment information and conceals it from the recipient. (It is unclear whether this encryption mechanism is conditioned on transaction size.)

Controllable (可控)

The “controllable” qualifier is added because, as Mu put it, “while we ensure that reasonable demands for anonymity are met, we also need to maintain our ability to crack down on criminal behavior.” 

Explanations of the digital yuan’s controllability have focused less on specific oversight mechanisms and more on justifying their necessity. At the China Development Forum, Mu suggested that complete anonymity has never been a serious proposition for central bank digital currencies in China or elsewhere, citing reports from the Bank of International Settlements (BIS) and the Financial Action Task Force (FATF) that emphasize the importance of safeguarding against the use these currencies for money laundering and financing terrorism. Mu also mentioned that the capability to monitor digital yuan transactions would also be used to prevent tax evasion and corruption. 

According to Mu, even transactions made with phone-number-only wallets would be traceable if suspicious behavior were ever detected. As an example, he explained that “big data analysis” could reveal evidence that such a wallet was being used to commit telephone fraud. Though the PBOC would not be able to use this data trail to uncover the wallet holder’s identity, Mu said that the PBOC could refer the suspected wallet to law-enforcement authorities with the appropriate jurisdiction, and those authorities could approach phone carriers or banks as needed to determine the wallet holder’s real identity.  

Associated Documents

China Financial Stability Report 2020 (中国金融稳定报告）http://www.pbc.gov.cn/goutongjiaoliu/113456/113469/4122054/2020122208471890109.pdf

“How Does the Central Bank Digital Currency Influence You and Me?” https://www.ccdi.gov.cn/yaowen/202006/t20200607_219642.html

“Progress of Research & Development of E-CNY in China”  http://www.pbc.gov.cn/en/3688110/3688172/4157443/4293696/2021071614584691871.pdf

Associated Terms

Chinese technology policy discourse has used the adjective "controllable" in several contexts, including "secure and controllable" (安全可控) and "indigenous/independent and controllable" (自主可控), to refer to technological systems that behave as expected and without outside interference. "Secure and controllable" was a concept in the 2019 draft Cybersecurity Review Measures and was later replaced with "supply chain security" in the 2020 final Cybersecurity Review Measures. 

References 

1. 2018 Slide Deck from Yao Qian outlining digital yuan project, including identity access privileges for various transaction types: https://www.itu.int/en/ITU-T/Workshops-and-Seminars/20180718/Documents/Yao%20Qian.pdf
2. 2018 article from PBoC Deputy Governor Fan Yifei outlining some key points on logic and  philosophy of digital yuan, published in 第一财: https://www.yicai.com/news/5395409.html 
3. 2018 article from Yao Qian detailing considerations on digital yuan’s technical design,  published in 第一财经: https://www.yicai.com/news/5404436.html 
4. 2020 article attributed to Central Commission for Discipline Inspection (CCDI) answering some common questions, concerns about the digital yuan, published on CCDI website: https://www.ccdi.gov.cn/yaowen/202006/t20200607_219642.html
5. China Financial Stability Report 2020 (中国金融稳定报告） http://www.pbc.gov.cn/goutongjiaoliu/113456/113469/4122054/2020122208471890109.pdf
6. Published version of speech given by Mu Changchun, director of the Digital Currency Research Institute at the PBOC, at China Development Forum 2021 (新浪财经). http://finance.sina.com.cn/zl/china/2021-03-25/zl-ikknscsk1349458.shtml
7. Media feature evaluating and comparing currently available options for e-CNY wallets (国际金融报）http://finance.sina.com.cn/money/bank/bank_hydt/2021-05-11/doc-ikmxzfmm1850479.shtml
8. “Central bank digital currencies: foundational principles and core features.” Bank of International Settlements report cited by Mu Changchun in his explanation of “controllable anonymity.” https://www.bis.org/publ/othp33.pdf
9. “FATF Report to the G20 Finance Ministers and Central Bank Governors on So-called Stablecoins.” Financial Action Task Force report cited by Mu Changchun in his explanation of “controllable anonymity.” https://www.fatf-gafi.org/media/fatf/documents/recommendations/Virtual-Assets-FATF-Report-G20-So-Called-Stablecoins.pdf
10. “ID required for new cell phones.” China Daily article covering the rollout of the law requiring ID for phone number purchases. https://www.chinadaily.com.cn/china/2010-09/01/content_11235859.htm