Report: Chinese workers converting CBDC into physical currency for withdrawal

China’s digital currency project is said to be facing initial challenges, as state employees who receive their salaries in e-CNY (digital yuan) reportedly rarely use it and instead convert it to physical cash. According to a report from the South China Morning Post, while some Chinese cities have started paying state workers in the country’s Central Bank Digital Currency (CBDC), most of these early adopters immediately convert it to cash. One employee stated that they preferred not to keep the money in the e-CNY app due to the lack of interest. Another civil servant mentioned that his wife, who receives her full salary in digital yuan, withdraws it as cash immediately because the digital currency has limited utility, preventing her from depositing it or purchasing financial products. Although China has been largely cashless for many years, many citizens are hesitant to adopt a purely digital currency like the digital yuan due to concerns about surveillance and limited use cases. However, as of July 20, 2023, over $250 billion worth of transactions have been conducted using the digital yuan. Yi Gang, the former governor of the People’s Bank of China, highlighted the need to strike a balance between privacy and security to promote the widespread adoption of the digital yuan. While privacy concerns have been raised, Gang claimed that the digital yuan can “fully protect privacy” through “controllable anonymity,” which allows for tracking of larger payments but not smaller ones. Various jurisdictions in China have been actively promoting the adoption of the CBDC through subsidies and consumption coupons.