China’s digital yuan, or e-CNY, is facing adoption challenges as some state workers paid in the country’s Central Bank Digital Currency (CBDC) are converting it to physical cash, citing usability and benefit concerns.
A May 13 report from the South China Morning Post noted that while some Chinese cities have started paying state employees with the digital yuan, many of these early adopters are quick to exchange their digital holdings for traditional cash. Sammy Lin, a state bank account manager in Suzhou, mentioned he prefers not to store his earnings in the e-CNY app due to the absence of interest earnings and limited acceptance of the digital currency both online and offline.
Civil servant Andrew Wang noted that while a portion of his salary paid in e-CNY doesn’t bother him much, his wife, who receives her entire salary in digital yuan, immediately withdraws it all in cash because the digital wallet does not allow for deposits or the purchase of financial products.
Despite China’s status as a largely cashless society for many years, the SCMP report highlights that reluctance to embrace a fully digital currency like e-CNY persists among the populace, primarily due to concerns over surveillance and the currency’s restricted utility.
Even with these adoption hurdles, Yi Gang, the former governor of the People’s Bank of China, stated that transactions totaling more than $250 billion have been conducted using the digital yuan as of mid-2023.
Ye Dongyan, a researcher at Beijing’s Cheung Kong Graduate School of Business, emphasized the need for a better balance between privacy and security to facilitate wider acceptance of the digital yuan across China. He pointed out the contrast in anonymity between digital and paper currencies, stressing that more thought is needed on the privacy implications of digital yuan transactions.
Despite these privacy worries, Yi Gang claimed at a Beijing forum in March that the digital yuan ensures “controllable anonymity,” where small payments remain untracked but larger transactions may be monitored.
Since its launch in 2020, several Chinese cities have actively promoted the CBDC’s uptake by distributing over 180 million Chinese yuan ($26.5 million) through subsidies and consumption coupons to encourage use of the digital yuan.