Chinese Locals Cash Out CBDC Digital Yuan For Physical Cash
- The latest reports suggest that several Chinese locals paid in digital yuan or e-CNY have rarely used this CBDC, and are most likely converting it to physical cash.
- Analysts say that the major reluctance towards using digital yuan in China is because the CBDC doesn’t provide absolute privacy to its users.
China’s central bank digital currency (CBDC) digital yuan is finding it difficult to see continued acceptance among Chinese locals.
The latest reports suggest that several Chinese workers paid in digital yuan or e-CNY have rarely used this CBDC, and are most likely converting it to physical cash.
In the report on Monday, May 13, the South China Morning Post noted that several Chinese cities are paying the state employees in digital yuan.
However, many of these early adopters convert it to cash immediately. Sammy Lin, an account manager at a Chinese state bank in Suzhou, said:
“I prefer not to keep the money in the e-CNY app because there’s no interest if I leave it there. There are also not so many places, online or offline, where I can use the e-yuan.”
Andrew Wang, a civil servant, expressed little concern regarding the concept of digital currency, as only a fraction of his salary is paid in digital yuan.
Conversely, his wife, who receives her entire salary in digital yuan, promptly converts the entire sum to physical cash upon receipt, citing a perceived lack of practicality with the digital currency.
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“She can’t deposit the money or buy financial products with the e-CNY wallet,” Wang said.
For a large part of the last decade, China has been a “functionally cashless” society. Despite this, several Chinese citizens have shown reluctance to use the CBDC Digital Yuan.
The SCMP report states that this reluctance has been due to the broader fears of surveillance and its limited use cases for e-CNY.
Digital Yuan Records Healthy Transaction Count
Despite these reservations, Yi Gang, former governor of the People’s Bank of China, reported that over $250 billion worth of transactions had been facilitated through the digital yuan as of July 20, 2023.
Ye Dongyan, a researcher at Beijing’s Cheung Kong Graduate School of Business, emphasized the necessity of striking a better balance between privacy and security if the government intends to implement the digital yuan across the entirety of China. Gang said:
“Paper currency is used anonymously, but the digital yuan is different. The boundaries between information tracking and information security protection need more deliberation.”
He added that the biggest challenge with the CBDC era has been the fear of compromising on privacy.
While speaking at a forum in Beijing back in March, Gang said Digital Yuan didn’t guarantee to “fully protect privacy” due to something dubbed as “controllable anonymity”.
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This means that the Chinese government won’t be tracking small payments, but would indeed track the large ones.
Since the Digital Yuan’s inception back in 2020, several Chinese jurisdictions have been working to boost the adoption of CBDCs.
Several Chinese cities have been giving away nearly over 180 million Chinese yuan ($26.5 million) in the form of consumption coupons or subsidies.
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