China has sounded the alarm over how crypto projects are using biometric data, warning that practices like iris and facial scanning could endanger individual privacy and national security.

China’s Ministry of State Security has raised concerns that crypto projects are using biometric tools, like iris, facial, and fingerprint scans, as a cover to gather sensitive personal data.

In a bulletin published Wednesday, the MSS outlined several risks tied to these technologies, emphasising 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 worldwide under the guise of issuing cryptocurrency tokens, later transferring the data elsewhere. 

Authorities said this posed “a threat to personal information security and even national security,” highlighting 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, calling for stronger public awareness and caution when engaging with platforms that request biometric input.

Facial recognition was also flagged as “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.

While the bulletin did not name any specific companies, the description appears to align with World (formerly 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 has claimed that 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.

Although Worldcoin promotes 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, for instance, 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.

While Worldcoin and its parent entity, Tools For Humanity, have maintained that they are working with local regulators and prioritising transparency, critics argue that the project’s approach to consent and data handling remains insufficient given the sensitivity of biometric identifiers.

As an alternative, Ethereum co-founder Vitalik Buterin recently proposed a concept called “pluralistic identity,” which 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 decentralised identity systems argue that a multi-layered approach balances the need for authentication while preserving privacy.

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