Do Chinese residents need the E-Yuan?

China distributes nearly $30 million in e-CNY to promote the CBDC.

China is distributing nearly $30 million in e-CNY to promote the CBDC. So far, however, adoption has been limited.

To celebrate the start of spring, several cities in China handed out the central bank's digital currency, the e-CNY. In total, the municipalities distributed more than 180 million of the digital yuan (about $26.52 million) to residents. This comes from a report in the Chinese daily Global Times. Regional governments launched 200 different programs in the form of subsidies and shopping vouchers to boost adoption.

Even Shenzhen, the metropolis, reportedly distributed more than 100 million e-yuan to its residents. It’s the first time China has distributed its own CBDC since the easing measures in the country. Shenzhen last handed out the e-yuan at the end of May last year.

E-Yuan, a flop in China?

While organizers call the promotion efforts a 'success,' observers estimate adoption among the population to be quite low. For example, a former employee of the People's Bank of China (PBOC) told the news portal Caixin that he was 'disappointed' with usage so far.

Dr. Jonas Gross sees the problems in the lack of advantages the e-yuan offers over third-party digital payment options. "Why should a CBDC be used as a payment method when there are already more efficient, cheaper, and convenient providers in China, like WeChat Pay or Alipay?" said the chair of the Digital Euro Association. The European Central Bank (ECB), which is also working on a digital euro alternative, could learn important lessons for its own project, Gross added.

China isn't alone in the low adoption rate. Also in Nigeria, adoption of the e-Naira by the population has remained limited. As a result, the central bank limited cash usage. People have shifted more toward Bitcoin, leading to BTC prices of 60,000 US dollar on individual P2P exchanges. And crypto activity remains high in China despite the ban.