In the past month, Chinese payments platform Alipay has disclosed a number of patents relating to and revealing more details of China’s planned central bank digital currency (CBDC), the digital yuan.
According to a report in local media outlet Interchain Pulse on March 23, Alipay is set to play an integral part in the major functions of the currency when it is launched.
Alipay to be a secondary issuer of China’s CBDC
The first patent, published Feb. 21, revealed that Alipay is likely to be involved as a third-party operating agent in secondary issuance of the currency. This would put Alipay on an equal footing with commercial banks, who will not have a secondary monopoly on digital currency.
However, the most important revelation is of how the digital currency can be traced, needing the functionality of a blockchain-based currency, despite not relying on blockchain technology itself.
Transactions will be split into execution instructions corresponding to each party, along with an execution priority for each instruction. Instructions are then sorted and executed in order. By following the sorted execution instruction list back, transactions can be traced back for the entire life cycle of the CBDC.
A related patent, published Feb. 28, details front-end encryption machines, deployed by the central bank with secondary issuers of the currency. These would monitor secondary issuance and transactions, and be roughly analogous to a node for a blockchain.
Accounts suspected of illegal activity can be restricted
On Feb. 25, Alipay published a patent detailing “a method and device for controlling digital currency accounts.”
The regulator will provide a control device installed at the operating agency, with which supervisors can restrict suspected accounts within predefined rules. This will allow the supervisors to circumvent the need to go through the operator, allowing immediate restriction.
Restrictions that can be applied include blocking one or more account operating…