Chinese workers are showing a lack of enthusiasm towards the country’s central bank digital currency (CBDC). A report on May 13 revealed that some workers who received their salaries in digital yuan (e-CNY) converted the asset into fiat currency immediately after they were paid, indicating a clear preference for physical cash over the digital alternative.
Despite the Chinese government’s efforts to promote the adoption of the digital yuan, a report from the local media outlet South China Morning Post indicates that many workers are hesitant to use it in their daily transactions.
Chinese Workers CBDC Concerns Leans on Lack of Utility
UPDATE: CHINESE WORKERS WHO ARE PAID IN CBDC, E-CNY, ARE REPORTEDLY CASHING OUT FOR PHYSICAL MONEY
— BSCN Headlines (@BSCNheadlines) May 13, 2024
The report surveyed responses from local workers and detailed the reason behind China’s slow uptake of the digital yuan.
Ye Dongyan, a researcher at the Cheung Kong Graduate School of Business in Beijing, highlighted the need to balance privacy and security, which has slowed the progress of promoting the digital yuan.
“Paper currency is used anonymously, but the digital yuan is different,” he said. “The boundaries between information tracking and information security protection need more deliberation.”
Workers in the Chinese civil service also expressed their thoughts on the use of the CBDC.
Andrew Wang, a civil servant, said he wasn’t too worried by the idea of digital cash as it was only a small part of his salary being paid in digital yuan. His wife, who receives her full salary in digital yuan, however, withdraws the full amount as regular cash the moment she’s paid due to a lack of utility with the digital currency.
He explained that she couldn’t deposit the funds or buy financial products with the e-CNY wallet, which limits the use cases and makes cash a better alternative.
Even in China, skepticism is strong when it comes to CBDCs.
Those who have been paid in the digital Yuan choose to convert it to cash almost immediately. pic.twitter.com/I1Mho48oHe
— Coin Bureau (@coinbureau) May 13, 2024
It could be recalled that China started trials of the digital yuan in selected cities in 2019, looking for a nationwide rollout amidst fierce global competition to establish a state-backed digital currency. While no specific timeline has been announced for the national launch, the country has actively promoted the currency since the trials began.
China’s Digital Yuan Recorded $250B in Processed Transactions
Yi Gang, the former governor of the People’s Bank of China, told the South China Morning Post that over $250 billion in transactions were processed using the digital yuan as of mid-2023.
He highlighted that privacy was still a major issue despite the substantial volumes, however.
Unlike traditional cash, which allows for anonymous transactions, digital yuan is traceable, giving the government a high level of visibility into individuals’ financial activities. The lack of privacy raises concerns about surveillance and the potential abuse of personal financial data.
While Gang’s concern borders on privacy, a top Chinese law firm analyzed the anti-money laundering (AML) challenges posed by the digital yuan. It highlighted the cross-border nature of digital currency transactions, which can complicate traditional AML monitoring methods.
Regardless, the Industrial and Commercial Bank of China, the world’s largest bank by total assets, revealed in its annual report that over 15 million e-CNY wallets were newly created by individuals in 2023, with an additional creation of 1.3 million wallets by business entities, while over 2.7 million businesses joined the list of those accepting the digital currency.
Crypto News reported in February that over 29.16 million digital yuan wallets have been opened in Suzhou, China, as individuals and firms transacted over $416,811,390,000 worth of CBDC in 2023.
The digital yuan is now utilized in various public services, including tax and social security payments, which are in addition to personal expenditures.