Digital yuan being dumped in favor of cash

As Beijing tries to popularize the digital yuan, only a few appear ready to use it.

As Chinese government employees, particularly those working at state-owned enterprises and government organizations, become early adopters of receiving their salaries in digital yuan, a divide is emerging in their perceptions of the currency despite Beijing’s efforts to promote its use.

Sammy Lin, an account manager at a state-owned bank in Suzhou, said in an interview with the South China Morning Post that although he receives his salary in digital yuan through the e-CNY app, he, like many others, chooses not to pay his salary. It has defunded the app due to concerns about lack of interest and limited availability.

“I prefer not to keep the money in the e-CNY app because there will be no interest if I leave it there.”

Sammy Lin

The report states that the traceable nature of the digital yuan has raised concerns about the exposure of personal financial data and encouraged some to convert the digital currency into cash.

Addressing these concerns, Ye Dongyan, a researcher at the Cheung Kong Institute of Management in Beijing, said that Beijing must strike a delicate balance between privacy and security in the promotion of the digital yuan.

“Paper currency is used anonymously, but digital yuan is different. The boundaries between tracking information and maintaining information security need to be considered more.”

Ye Dongyan

While the currency offers controllable anonymity for smaller transactions, larger transactions require identification to prevent illegal activities such as money laundering.

Despite government assurances of high levels of privacy protection, some still remain skeptical. Albert Wang, a municipal worker in Suzhou, said his wife was “holding back the yuan,” noting the limitations of the digital yuan compared to established online payment platforms such as Alipay and WeChat Pay. [digital yuan] because it cannot deposit money or purchase financial products with the e-CNY wallet.”

China’s digital yuan is a leader in the field of central bank digital currencies, especially among major economies. With transaction volume reaching 1.8 trillion yuan (about $250 billion), its adoption and development appears to be triggering other economies to dive into the digitalization race.

Global banking institutions have had limited participation in the digital yuan ecosystem to date, but Beijing appears focused on gradual expansion. In 2023, French bank BNP Paribas began integrating digital yuan into its services by connecting corporate customers’ wallets to their bank accounts. Later, multinational banking giant Standard Chartered also began offering clearing services for digital yuan.