“Challenges and prospects of digital yuan in China”

Challenges in the Development of China’s Digital Yuan

The project of China’s digital currency, known as the digital yuan, is still facing some developmental challenges. According to the latest reports, some Chinese state employees who receive “e-CNY”, the digital yuan, rarely use it and immediately convert it into cash.

Lack of Appeal of e-CNY for State Employees

Some Chinese cities are already paying their state employees the central bank’s digital currency, but most of them opt to convert it into cash immediately. Employees believe that holding funds in the e-CNY app is not profitable due to the lack of interest and the limited number of online and offline places where the digital yuan can be used.

High Transaction Value Using Digital Yuan

Despite these difficulties, it is worth noting that by July 2023, over 250 billion dollars’ worth of transactions have been made using the digital yuan. This is a significantly impressive sum that shows some level of acceptance of this new form of payment.

Privacy-Related Challenges

One of the main challenges associated with the widespread introduction of the digital yuan is privacy issues. Concerns regarding this matter are understandable, hence the need to increase efforts to maintain a balance between privacy and security when using the new currency.

Chinese Government’s Response to Privacy Concerns

Despite privacy concerns, the Governor of the People’s Bank of China, Yi Gang, assures that the digital yuan is able to “fully protect privacy” through implementing so-called “controlled anonymity”. This mechanism does not track small transactions but monitors larger ones.

Regional Initiatives Promoting the Digital Yuan

Since September 2020, several regions in China have taken actions to increase the adoption of the digital yuan. By providing residents with subsidies and consumption vouchers totaling over 180 million Chinese yuan (approximately 26.5 million dollars), local authorities aimed to incentivize the use of this new form of currency.