China Opposes Iris-Scanning Crypto Initiatives Globally

China Raises Concerns Over Biometric Data Use in Crypto Projects

China has raised significant concerns about the use of biometric data by cryptocurrency projects, highlighting potential threats to both individual privacy and national security. The Ministry of State Security (MSS) has warned that practices such as iris and facial scanning could be exploited to collect sensitive personal information, posing serious risks.

Risks Beyond Privacy

In a recent bulletin published on Wednesday, the MSS outlined several risks associated with the use of biometric technologies. These include the irreversible nature of biometric identifiers once compromised. According to the ministry, misuse of such data could allow foreign actors to exploit Chinese citizens and conduct surveillance or infiltration activities against state institutions.

The MSS pointed to a recent case involving an unnamed overseas company that allegedly scanned iris data globally under the guise of issuing cryptocurrency tokens. This data was later transferred elsewhere, raising alarms about the potential for misuse. Authorities stated that this poses “a threat to personal information security and even national security,” emphasizing the potential use of such data in espionage operations or long-term manipulation of digital identities.

“Unlike passwords, biometric keys cannot be changed,” the MSS warned, urging stronger public awareness and caution when engaging with platforms that request biometric input.

Facial Recognition as a Threat

Facial recognition technology was also flagged as a potential threat to national security if improper storage solutions lead to leaks. Officials cited instances where foreign intelligence services were able to use manipulated facial data in espionage. The MSS called for tighter oversight of how companies store, transmit, and protect collected biometric information, warning that poor safeguards could lead to massive leaks or deliberate misuse.

Worldcoin Under Scrutiny

While the bulletin did not name any specific companies, the description appears to align with Worldcoin, a project co-founded by OpenAI CEO Sam Altman. Worldcoin collects iris data in exchange for its World (WLD) token, promoting what it calls a “proof of personhood” system aimed at distinguishing real humans from bots in a digital economy.

Worldcoin claims its operations span over 160 countries, although China is not among them. Its system relies on proprietary hardware called the Orb, which scans users’ irises to create unique digital identities. In exchange, users receive WLD tokens, which they can store or trade.

Despite promoting itself as a tool for digital inclusion and universal access to income, its use of biometric data has raised red flags among regulators in several countries. Kenya suspended Worldcoin’s operations in 2023 after more than 300,000 people had signed up, raising alarms over how the project handled sensitive user data. Spain took similar action the following year, ordering the company to erase all stored biometrics after finding breaches of EU data protection laws.

Other countries, including Germany, Portugal, Brazil, South Korea, Colombia, and Hong Kong, also moved to suspend or investigate Worldcoin’s operations, often citing non-compliance with local data protection regulations. Indonesia, one of the latest to intervene, froze Worldcoin’s operations earlier this year for failing to register its local entity as an Electronic System Operator. Authorities there labelled the project’s unlicensed activity a serious violation of domestic digital law.

In Singapore, police opened investigations into individuals trading Worldcoin accounts, and have warned that accounts tied to biometric identities could be exploited for terrorism financing or money laundering.

Alternative Approaches to Biometric Identification

As an alternative to iris scans, Ethereum co-founder Vitalik Buterin recently proposed a concept called “pluralistic identity.” This approach avoids reliance on any single data source or verification method. Instead of enforcing a rigid one-person-one-ID system based on biometric scans, pluralistic models allow identity to emerge from multiple independent attestations, such as from governments, social networks, or even individual communities.

Buterin and other supporters of decentralized identity systems argue that a multi-layered approach balances the need for authentication while preserving privacy. This model offers a promising alternative to traditional biometric identification methods, addressing some of the concerns raised by authorities like the MSS.