Changshu, a Chinese city, intends to use digital yuan to pay employees.

According to local media, a city in eastern China intends to pay its public sector personnel only with digital currency.

According to the Shanghai Securities Journal, a subsidiary of state news agency Xinhua, Changshu city, a 1.5 million-person city in Jiangsu, will begin paying civil employees and people who work for public institutions using the digital yuan starting next month.

Teachers, medical personnel, technicians, journalists working for government-run media outlets, and employees of state-owned businesses would all be impacted by the change.

The action is a significant step toward promoting the usage of the digital currency (e-CNY).

Beijing began investigating a potential sovereign digital currency in 2014, and in 2020 the system's initial trial run commenced in pilot locations such Shenzhen, Suzhou, Xiongan, and Chengdu.

China has been actively promoting the usage of the centralized digital currency and even views it as a potential instrument to help end the dominance of the US dollar.

But three years later, it still has a lot of challenges to overcome, including as its restricted ability to settle transactions and the public's preference for well-known digital payment systems like WeChat Pay and Alipay, which is controlled by Alibaba.

Several local governments have started small-scale trials to utilize the digital currency to pay for government subsidies in an effort to promote it by enticing businesses and public utilities to adopt it.

Since June of last year, Changshu has used it to pay out 2.5 million yuan (US$363,000) in overtime to approximately 4,900 workers at state-owned enterprises. It has also been utilized by Changshu for a few subsidies, including payments to high-tech companies, transportation for local government employees, and housing expenses.

The Jiangsu provincial government unveiled a strategy in February to expand the adoption of the digital yuan by 2025. Its usage for tax payments, social security, education, and healthcare costs were among the measures.

The Changshu plan may or may not be implemented in other regions of the province.

Beijing claims that because e-payment platforms will no longer have access to transaction information, the digital yuan will help protect people's privacy.

Foreign observers are concerned because it will provide the government with real-time information about all transactions made by people and businesses.

The announcement became a popular topic of conversation online. Some internet users suggested that compensating civil servants with digital currency could assist to reduce official corruption, but others questioned the adaptability of older individuals.

The digital yuan has primarily been utilized domestically up until this point, but some economic observers think that Western sanctions against Russia following its attack on Ukraine, particularly the ban on using the Swift international payments system, have encouraged China to speed up the development of the digital yuan.

The city is working with the People's Bank of China to hold trials to use the digital yuan for cross-border payments so that residents of Hong Kong and the Greater Bay Area can use it for travel, living expenses, and retail consumption, said Darryl Chan Wai-man, deputy chief executive of Hong Kong's monterey authority, at a forum on Saturday.

By fLEXI tEAM