Report: Chinese workers exchanging CBDC for actual currency

China’s digital currency project is facing challenges, as some state workers who are paid in the digital yuan are not using it and instead converting it to physical cash, according to a report from the South China Morning Post. While some Chinese cities have started paying state employees with the country’s central bank digital currency (CBDC), many of these early adopters immediately convert it to cash. This is due to concerns about the lack of interest earned on the digital currency and the limited utility it offers. The digital yuan app does not allow users to deposit money or purchase financial products, making it less attractive to users. Additionally, there are broader concerns about surveillance and privacy, which hinder the adoption of the digital yuan. Despite these challenges, over $250 billion worth of transactions have been conducted using the digital yuan as of July 20, 2023. However, there is a need to address privacy and security concerns in order to fully roll out the digital yuan across China. The privacy issues associated with the CBDC are seen as the biggest challenge in the digital finance era. The digital yuan offers “controllable anonymity,” which means small payments are not tracked, but larger ones are. Efforts have been made to promote the adoption of the CBDC, with subsidies and consumption coupons being given away in multiple cities. However, there is still work to be done to ensure the widespread acceptance and use of the digital yuan in China.