China’s digital currency project is reportedly facing challenges, as state workers who are paid in digital yuan are converting it to physical cash instead of using it. According to a report from the South China Morning Post, while some Chinese cities have started paying state employees in the country’s Central Bank Digital Currency (CBDC), most of them immediately convert it to cash. The lack of interest and limited utility of the e-CNY app are cited as reasons for this behavior. Chinese citizens, despite living in a predominantly cashless society, have reservations about using a purely digital currency due to concerns about surveillance and the limited use cases of the digital yuan. However, as of July 20, 2023, over $250 billion worth of transactions have been conducted using the digital yuan. Privacy concerns surrounding the CBDC are seen as the biggest challenge in its adoption, as there needs to be a balance between privacy and security. The digital yuan offers “controllable anonymity” where small payments are not tracked, but larger ones are. Efforts to promote the adoption of the CBDC have been made through subsidies and consumption coupons given by various cities in China.
Report: Chinese Workers Converting CBDC Payments into Physical Currency