China Warns Biometric Crypto Projects Threat Privacy and National Security

China has issued a formal warning against cryptocurrency projects that involve the collection of biometric data, particularly iris scans, highlighting the potential risks to individual privacy and national security. The Ministry of State Security (MSS) emphasized the dangers of transferring sensitive biometric information—such as iris scans—outside the country, often in exchange for digital tokens. These scans are considered irreversible and uniquely personal, making them more vulnerable than traditional identifiers like passwords [1].

The warning, while not naming specific projects, appears to target initiatives that incentivize users with cryptocurrency for biometric verification. One such project is Worldcoin, founded by Sam Altman and associated with OpenAI. The project uses a device called the “Orb” to scan users' irises and distribute digital tokens as part of a decentralized identity system [3]. Worldcoin has already faced regulatory challenges in several countries, including Germany, France, and Kenya, over concerns regarding data privacy and informed consent [4].

Chinese officials have expressed heightened concerns over the unauthorized transfer of biometric data, which could enable identity theft, surveillance, or even espionage if accessed by foreign entities [5]. This warning aligns with China’s broader regulatory framework, which has long restricted the trading and issuance of digital assets. The government has previously imposed strict controls on cryptocurrency activities, and this latest move signals a growing emphasis on data sovereignty and cybersecurity [6].

The MSS’s statement also reflects a global trend of increased regulatory scrutiny over blockchain-based identity systems, especially those utilizing sensitive biometric data. As decentralized platforms operate across multiple jurisdictions, regulators are becoming more cautious about the potential for data misuse and the lack of oversight [7]. This may lead to stricter compliance requirements for projects like Worldcoin, particularly in regions with rigorous data protection laws [8].

The intervention underscores a shift in regulatory priorities, with governments globally re-evaluating how to balance technological innovation with the protection of individual privacy. The future viability of biometric-driven crypto projects may increasingly depend on their ability to meet stringent regulatory expectations [9].

Sources:

[1] Mitrade (https://www.mitrade.com/insights/news/live-news/article-3-1016641-20250806)

[2] AInvest (https://www.ainvest.com/news/china-warns-iris-data-collection-crypto-poses-national-security-risk-2508/)

[3] FinanceFeeds (https://financefeeds.com/china-flags-eye-scanning-crypto-projects/)

[4] TheCryptobasic (https://thecryptobasic.com/2025/08/06/china-warns-of-security-risks-from-global-iris-scan-collection-linked-to-crypto-rewards/)

[5] CoinCentral (https://coincentral.com/chinese-ministry-flags-security-threat-from-iris-data-used-in-crypto-programs/)

[6] CoinGape (https://coingape.com/beijing-cracks-down-on-crypto-iris-scanning-as-sam-altmans-worldcoin-faces-scrutiny/)

[8] Crypto.news (https://crypto.news/worldcoin-under-fresh-scrutiny-china-warns-against-crypto-for-iris-trend/)

[9] 99Bitcoins (https://99bitcoins.com/news/altcoins/chinese-biometric-data-exploited-through-crypto-schemes-authorities-allege/)