China warns against crypto projects using iris scans over national security risks

China has issued a formal warning against cryptocurrency projects that employ iris-scanning technology, citing serious national security and privacy risks related to the collection and transfer of biometric data. The Ministry of State Security (MSS) has raised concerns that such data—particularly iris scans—could be exploited for identity theft, surveillance, or espionage if shared with foreign entities [1]. These warnings reflect a growing regulatory focus on the potential misuse of sensitive biometric information within the crypto ecosystem.

While the MSS did not directly name any specific project, the warning is widely interpreted as targeting Worldcoin, a cryptocurrency initiative co-founded by Sam Altman that collects iris scans in exchange for digital tokens. The project utilizes a device known as the “Orb” to scan users' irises and distribute cryptocurrency as part of a broader effort to build a decentralized identity network [2]. Worldcoin has already faced regulatory scrutiny in countries like Kenya, Brazil, Spain, Portugal, and Hong Kong, where similar activities have been banned due to privacy and data consent concerns.

The Chinese government’s stance is consistent with its broader efforts to regulate and restrict cryptocurrency activities, emphasizing the need to maintain control over data sovereignty. Regulators have long imposed strict limits on cryptocurrency trading and issuance within China, and the latest warning signals a continued effort to prevent foreign firms from accessing sensitive data through digital financial tools [3]. The MSS specifically highlighted the unique and irreversible nature of biometric data like iris scans, noting that once compromised, such data cannot be reset or replaced, making it a particularly high-risk asset.

The regulatory concerns extend beyond China’s borders. Governments worldwide are increasingly scrutinizing blockchain-based identity systems that rely on biometric data. These systems often operate without centralized oversight, which complicates the enforcement of data protection laws and the assurance of user consent [4]. As a result, projects like Worldcoin may encounter increasing operational difficulties in regions with strict privacy laws. This growing regulatory pressure could influence the future development of decentralized identity solutions, compelling firms to balance innovation with compliance.

The MSS’s warning highlights a shift in global regulatory priorities, with governments prioritizing data sovereignty over technological experimentation. As authorities around the world reassess the risks of biometric data collection, crypto projects will need to demonstrate strong adherence to both national and international data protection standards. Failing to meet these expectations could lead to operational shutdowns or strict limitations on data access and use [5].