Digital Yuan: Changshu City in China to Pay Government Staff in CBDC

Digital Yuan

Changshu City in China is set to implement the use of digital yuan as a mode of payment for government staff and employees. The central bank digital currency (CBDC) will be adopted from June 2023 for civil servants, professionals in school teaching, medicine, technicians and journalists in the city of Changshu, located in East China’s Jiangsu province.

This move will allow the government to monitor transactions and manage payments in a more efficient and centralized manner.

Digital Yuan

China is among the few developed countries that have been experimenting with CBDCs. Unlike typical cryptocurrencies like Bitcoin (BTC) and Ether (ETH), CBDCs are issued and maintained entirely by governments or central banks, rather than decentralized networks of nodes and validators.

Although many CBDCs rely on some form of distributed ledger technology, they can also be deployed to non-blockchain systems.

Changshu City has been using digital yuan as a mode of payment for transportation of government employees and housing expenses since June 2022. In addition, since 2022, some 4,900 enterprise employees have reportedly been paid a total of 2.5 million yuan ($363,000) for working additional hours.

The city’s adoption of the digital yuan aligns with the CBDC pilot program announced by Jiangsu’s provincial government in February. However, it is not clear whether it has been enforced in other areas yet.

China’s CBDC is one of about a dozen such projects formally in pilot phase, according to India has also launched a retail pilot of its digital rupee across four cities earlier this month. However, the adoption rate of digital yuan among Chinese citizens hasn’t been phenomenal.

Many people still prefer China’s popular digital payment platforms, WeChat and AliPay, which are widely used for services such as online shopping, utility bills, and transport.

The government is trying to assert control over citizens’ payments, and some critics suggest that the digital yuan is part of ongoing efforts to diminish reliance on the US dollar-dominated financial system.

However, the adoption of digital yuan has been slow due to people’s preference for WeChat and AliPay, which provide a seamless and user-friendly experience for digital payments.

In February, China included its CBDC in its official monetary base supply for the first time. This move is aimed at strengthening the digital yuan’s position in the country’s monetary system and encouraging its wider adoption.

The use of digital yuan in Changshu City’s government payroll system marks another step in China’s ongoing efforts to establish CBDCs as a mainstream mode of payment. While there are still concerns about government surveillance and privacy, the digital yuan offers several advantages over traditional payment methods, including greater efficiency, transparency, and lower costs.

It remains to be seen how quickly the adoption rate of the digital yuan will increase among the Chinese population.