China has pursued its central bank digital currency (CBDC) project aggressively in the last few years, and has recorded significant success. The country is now expanding the use of the CBDC to paying workers’ salaries and for cross-border payments.
The CBDC has been tested in a pilot that showed wide acceptance of the digital Yuan, so the Chinese government is testing its use for cross-border payments. A roadmap for the cross-border testing was released recently in Xuzhou city, a departure point for many cargo trains with 18 regular cross-border rail connections from the city to 21 nations in Asia and Europe.
The plan is to use the e-CNY in the city to pay for services and storage charges for goods carried by cross-border trains. The digital Yuan will also be used to pay for utility services and taxes in the city eventually.
Hong Kong, an autonomous economic region has also shown willingness to be a testing ground for cross-border payments with e-CNY in the Guangdong-Hong Kong- Macau Greater Bay Area.
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“The HKMA is working with mainland’s central bank, the People’s Bank of China, to test the digital yuan as a cross-border payment tool in Hong Kong,” said of Hong Kong Monetary Authority deputy chief executive Darryl Chan. This will probably be the final testing stage before the CBDC is officially released for public use.
Use of e-CNY for Paying Salaries
While Xuzhou city is testing the e-CNY for cross-border payments, Changshu city in Jiangsu province is testing its use in paying the salaries of public servants.
By May 2023, all government employees as well as staff at state-owned companies and public institutions such as schools, hospitals, libraries, research institutes and media organizations in the city will be paid in the digital currency, CNN Business reports.
The city with a population of 1.7 million has already participated in the previous pilot tests and is only proactively expanding the use cases to payment of salaries.
If China eventually launches the digital Yuan, it will turn the country to a completely cashless society with the government having full control of how people spend their money and on what.
Many crypto supporters have criticized the introduction of CBDCs, but the Chinese people seem very comfortable with the development.
Many Countries Pursuing CBDCs
Many other top economies like Russia are also pursuing the idea of CBDCs, mainly as an alternative to cryptocurrencies which are decentralized and difficult to track. For Nigeria which launched its own CBDC in 2021, the acceptance isn’t quite as China’s.
However, it is clear that more countries will be walking this path, especially if China succeeds in launching its own CBDC. The launch will embolden more countries to take complete control of the financial system, which may end up giving them total financial control.