Ahead of plans for a full-scale launch of the digital yuan, the Chinese city of Changshu has announced that salaries of all government employees will be paid in central bank digital currency (CBDC).
The new payment scheme will begin in May, allowing all civil servants in the city to be compensated in the experimental digital yuan. Information from the Changshu City Local Finance Bureau noted that employees could opt for digital or traditional yuan payments in their bank accounts.
Changshu’s main financial body expressed readiness to begin a new payment scheme, noting that the manual settlement windows of government institutions can support digital yuan payments. Analysts argue that paying wages in the digital yuan is a veritable option for the People’s Bank of China (PBoC) to increase the adoption rates of the CBDC.
“In the future, digital renminbi may increase points and expand the scope in the fields of corporate and cross-border payments,” said Su Xiaohui, consultant at Analysys. “it is expected that more cities will use Changshu as a reference to actively promote the digital renminbi salary scenario.”
Changshu has been at the forefront of promoting digital yuan usage in the country by integrating the CBDC into the payment for utilities. The city’s administrators said residents could use the digital yuan to pay for water and gas, transportation, and hospital bills.
Chinese authorities have been scrambling to increase the adoption rates of the digital yuan following an unimpressive streak throughout 2022. While transaction volumes reached $14 billion and wallet downloads surged past the 200 million mark, the PBoC noted that interest in the digital yuan had begun to wane.
In response, authorities began incentivizing residents to use the CBDC by giving away over $26 million worth of digital yuan during the Chinese New Year celebrations. The PBoC added new functionalities, including the red envelope feature, in a valiant effort to compete with existing payment platforms like Alipay and WeChat Pay.
Offline payment and cross-border settlement functionalities form part of the array of features that the PBoC is banking on to increase adoption rates.
Hong Kong snubs the digital yuan
In the spirit of onboarding new users, the Chinese central bank expanded its offering to Hong Kong, but its efforts were largely ignored. Within the first four days of providing Hong Kong’s residents with the option of digital yuan hard wallets, only 625 individuals signed up.
It appeared that the offer of a 20% discount on purchases using the CBDC failed to sway a large majority of residents to adopt the digital yuan. However, authorities say they will be intensifying efforts to onboard more Hong Kong residents with the digital yuan by providing a SIM card hard wallet.
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
Watch: Blockchain provides perfect foundation for CBDC
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