Cash still king for China’s workers as digital yuan salaries fail to make splash

A year ago, Changshu, a county-level city under the jurisdiction of Suzhou, took the lead by paying all public sector workers in digital yuan, and Lin’s employer followed suit months later.

But Lin, like most others in this pioneer cohort, is not actually using the virtual money directly. Their reasons range from functional limitations to worries over privacy.

“I prefer not to keep the money in the e-CNY app, because there’s no interest if I leave it there,” she said. “There are also not so many places, online or offline, where I can use the e-yuan.”

Privacy issues, which former People’s Bank of China governor Yi Gang called “the biggest challenge of the digital finance era”, are also making many reluctant to embrace the new currency.

“Though I myself don’t worry much about privacy – online payment is so common that I rarely use cash now – I understand there are people who are concerned about this,” Lin said.

Ye Dongyan, a researcher at the Cheung Kong Graduate School of Business in Beijing, said the need to balance privacy and security has held back progress in promoting the digital yuan.

“Paper currency is used anonymously, but the digital yuan is different,” he said. “The boundaries between information tracking and information security protection need more deliberation.”

Yi, the former PBOC governor, said at a March forum in Beijing that China’s digital currency “is able to fully protect privacy” via “controllable anonymity”, meaning no digital footprint for smaller transactions and traceability for larger ones.

But large-value transactions can only be done within identified wallets so they can be traced, Mu said, adding this is to prevent criminal behaviour such as money laundering and the financing of terrorism.

Albert Wang, who works at a municipal government body in Suzhou and has part of his salary paid in digital yuan, said he does not mind the arrangement since it is only a small portion – a few thousand yuan a month.

But his wife, also a civil servant in the city, has all her salary paid in digital yuan and deals with the money the same way as Lin.

“She withdraws it upon receipt, because she can’t deposit the money or buy financial products with the e-CNY wallet,” Wang said.

Wider adoption of the digital currency could help curb corruption to some extent, as it reduces cash bribery, he said, though corruption can occur in other forms.

“The disadvantages are obvious as it is not accepted in all shops, and serves merely as a payment tool,” he said, adding this makes it uncompetitive with Alipay and WeChat Pay, which are almost universally used and have a number of other functions.

“The development of online payment tools has been so fast and fierce that they can’t possibly be replaced by a new thing, unless it’s a disruptive innovation,” he said.

It has not yet announced a timeline for a national launch, but has been proactively marketing the currency since the trials began.

The Industrial and Commercial Bank of China, the largest bank in the world in terms of total assets, said in its annual report that last year over 15 million e-CNY wallets were newly opened by individuals and over 1.3 million by business entities. More than 2.7 million shops were new additions to the list of those accepting the currency.