Shalini Nagarajan

Civil servants and government employees living in Changshu, a city in East China’s Jiangsu province, will reportedly be paid in the country’s central bank digital currency (CBDC) from June onwards.



Professionals in school teaching, medicine, technicians and journalists will be among those paid under the new system, South China Morning Post reported, citing an affiliate of China’s official state news agency.



China is one of the first developed countries to experiment with fully-fledged CBDC. CBDCs differ from typical cryptocurrencies like bitcoin (<a href="https://blockworks.co/price/btc" target="_blank" rel="noreferrer noopener">BTC</a>) and ether (<a href="https://blockworks.co/price/eth" target="_blank" rel="noreferrer noopener">ETH</a>). They&#8217;re issued and maintained entirely by governments or central banks, rather than decentralized networks of nodes and validators. 



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



The concept wouldn’t be entirely new to Changshu. Since June 2022, some 4,900 enterprise employees there were <a href="https://www.scmp.com/news/china/politics/article/3217996/chinese-city-changshu-plans-pay-employees-using-digital-yuan" target="_blank" rel="noreferrer noopener">reportedly</a> paid a total of 2.5 million yuan ($363,000) for working additional hours.



Changshu also uses digital yuan as a mode of payment for transportation of government employees and housing expenses, among other things.



The city&#8217;s adoption of the system aligns with the CBDC pilot program announced by Jiangsu’s provincial government in February. However, it isn’t clear whether it’s enforced in other areas just yet.



China has been developing use-cases for CBDCs <a href="https://blockworks.co/news/analysis-what-exactly-is-chinas-cbdc" target="_blank" rel="noreferrer noopener">over the past few years</a>. US lawmakers, pundits and <a href="https://blockworks.co/news/fed-cbdc-robert-kennedy-fednow" target="_blank" rel="noreferrer noopener">presidential hopefuls have brought up</a> the topic several times, but there have been no specifics on the issuance or trial of such a currency.



Still, the adoption rate of the digital yuan among Chinese citizens hasn’t exactly been phenomenal. People still reportedly seem to prefer China’s popular digital payment platforms, WeChat and AliPay, which are both widely used for services such as online shopping, utility bills and transport.



China’s CBDC is one of about a dozen such projects formally in pilot phase, per <a href="https://cbdctracker.org/" target="_blank" rel="noreferrer noopener">CBDCTracker.org</a>. India <a href="https://timesofindia.indiatimes.com/business/india-business/rbis-retail-pilot-of-the-digital-rupee-goes-live-in-indias-4-metro-cities/articleshow/99317948.cms" target="_blank" rel="noreferrer noopener">launched</a> a retail pilot of its digital rupee across four cities earlier this month, while fully live CBDC projects include the Bahamas’ Sand Dollar and Jamaica’s JAM-DEX.



Some have <a href="https://hir.harvard.edu/digital-dynasties-how-chinas-cryptocurrency-could-unseat-the-dollar/" target="_blank" rel="noreferrer noopener">suggested</a> China’s digital yuan is part of ongoing efforts to diminish reliance on the US dollar-dominated financial system.&nbsp;



However, critics say the government is attempting to <a href="https://blockworks.co/news/experts-chinas-cbdc-is-all-about-finance-control" target="_blank" rel="noreferrer noopener">assert control over citizens’ payments</a>, which would come entirely under government surveillance. 



China counted its CBDC in its <a href="https://blockworks.co/news/china-cbdc-monetary-supply" target="_blank" rel="noreferrer noopener">official monetary base</a> supply for the first time earlier this year.



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Chinese City To Pay Government Staff in CBDC

Sebastian Sinclair

<div id="highlights-block_62902d2faa1fe" class="highlights">
 <ul>
 <li>Three Republican senators have introduced a bill seeking to prohibit app stores from hosting apps that enable transactions in China&#8217;s digital yuan</li>
 <li>Senators Tom Cotton, Mike Braun, and Marco Rubio claim the issue is a matter of national and economic security</li>
 </ul>
 
</div>



Three Republican senators are attempting to prohibit platforms from hosting apps that enable transactions in China&#8217;s digital yuan over fears it could be used to spy on US citizens.



Senators Tom Cotton, Mike Braun, and Marco Rubio introduced the &#8220;Defending Americans from Authoritarian Digital Currencies Act&#8221; on Thursday with the aim of curbing China&#8217;s influence on US soil.



The <a href="https://www.cotton.senate.gov/imo/media/doc/ecny_bill.pdf" target="_blank" rel="noreferrer noopener">bill</a> seeks to prohibit US-based companies like Google and Apple from hosting apps on their app stores that would otherwise support or enable China&#8217;s digital yuan, also known as the e-CNY.



Blockworks attempted to contact both Google and Apple on the matter but did not receive a response by press time.



“The Chinese Communist Party will use its digital currency to control and spy on anyone who uses it,&#8221; said Cotton in a statement. &#8220;We can’t give China that chance—the United States should reject China’s attempt to undermine our economy at its most basic level.&#8221;



The e-CNY, which is designed to replace physical coins and notes, is unlike cryptos such as bitcoin or ether in that it is state-controlled and issued by a central bank.



China has been pushing for wider domestic use of its digital currency. In early January, China’s largest messaging app – Tencent-owned <a href="https://www.cnbc.com/2022/01/06/chinas-digital-currency-comes-to-tencents-wechat-in-expansion-push.html" target="_blank" rel="noreferrer noopener">WeChat</a> – began supporting the digital yuan as political pressure over its use ratcheted up.



The digital yuan also made an appearance at the Beijing Olympic Winter Games earlier this year where it featured in an international trial among foreigners and athletes.



At the time, crypto proponent Senator <a href="https://cms.blockworks.co/china-debuts-digital-yuan-at-winter-olympics-amid-warnings-from-us-senator/" target="_blank" rel="noreferrer noopener">Pat Toomey</a> cautioned US policymakers to keep a watchful eye over the digital yuan&#8217;s potential to circumvent US sanctions and facilitate illicit money flows.



&#8220;The Chinese Communist Party’s digital yuan allows direct control and access to the financial lives of individuals,&#8221; Braun said in a statement. &#8220;We cannot allow this authoritarian regime to use their state-controlled digital currency as an instrument to infiltrate our economy and the private information of American citizens.&#8221;



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Senators Draft Bill to Ban Use of Digital Yuan in US-Based Mobile Apps

<div id="highlights-block_62009ed1d6876" class="highlights">
 <ul>
 <li>China has debuted its digital yuan to foreign visitors and athletes during the 2022 Winter Olympic Games in Beijing</li>
 <li>Senator Pat Toomey is asking policymakers to keep a watchful eye on the performance of the eCNY, labeling it as a means to &#8220;facilitate illicit money flows,&#8221; and its capacity to enhance &#8220;China’s surveillance capabilities&#8221;</li>
 </ul>
 
</div>



China has debuted an international trial for its central bank digital currency (CBDC) at the 2022 Beijing Winter Olympics amid concerns from US Senator Pat Toomey (R-Pa.) over the potential for the digital yuan to circumvent US sanctions.



Digital yuan trials, which have been ongoing domestically since 2019, were introduced to athletes and foreign visitors on Thursday as a means to pay for goods inside the Olympic Village alongside Visa payments and cash. 



China is hoping to boost the digital yuan&#8217;s presence throughout the country with the Winter Olympics as its platform to showcase to the rest of the world.



The trial follows China&#8217;s recently announced list of <a href="https://coingeek.com/china-intensive-blockchain-trial-involves-164-entities-in-beijing-shanghai/" target="_blank" rel="noreferrer noopener">164 national blockchain</a> entities to join domestic retail CBDC tests that will examine the feasibility of its product across a wide range of industries. Crypto is banned in the communist state, but China is a strong proponent of blockchain technology, albeit in a much more private, centralized and censored form.



In a <a href="https://www.banking.senate.gov/imo/media/doc/toomey_letter_to_yellen_and_blinken_on_digital_yuan.pdf" target="_blank" rel="noreferrer noopener">letter</a> penned by the senator to Treasury Secretary Janet Yellen and Secretary of State Antony Blinken on Wednesday, Toomey asked policymakers to &#8220;closely examine Beijing’s CBDC rollout&#8221; during the games and to provide his office with a briefing by Mar. 7.



<blockquote class="wp-block-quote">&#8220;Analysts have raised the eCNY’s potential to subvert US sanctions, facilitate illicit money flows, enhance China’s surveillance capabilities and provide Beijing with “first mover” advantages, such as setting standards in cross-border digital payments,&#8221; Toomey wrote.</blockquote>



Toomey is requesting knowledge on the CBDC rollout, including its distribution, user experience and the underlying source code to determine &#8220;ulterior motives,&#8221; censorship features or security flaws, according to the letter.



The senator is also seeking answers regarding the extent to which non-Chinese government officials, including the US, transacted in the digital yuan, among other requests. He said China’s crackdown on crypto presents an opportunity for the US to be the &#8220;forerunner&#8221; of crypto innovation, &#8220;grounded in individual freedom, and other American and democratic principles.&#8221;



Toomey, who is a member of the US Senate Committee on Banking, Housing and Urban Affairs, has long advocated for crypto regulation with a “do no harm” mindset and has previously asked the Securities and Exchange Commission to avoid hindering innovation as the US continues to figure out how to best approach fintech innovation.



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