The People’s Bank of China reports that they have successfully carried out the first salary payments using a blockchain-based version of the Digital Yuan.
China has made the first payments in #digitalyuan based on a blockchain in the New Xiong'an District. The country's leadership has been working on putting the central bank digital currency (CBDC) into circulation for some time now.
— DeFi Teller (@DeFiTeller) June 14, 2021
China tests Blockchain-based Salary Payment System
According to the People’s Bank of China (PBoC), the new payment system was first tested in the Xiong’an New Area, which was also one of the first testing grounds for the Digital Yuan. Testing was done in cooperation with the Agricultural Bank of China, which designed the first hardware wallets for the Digital Yuan.
Workers in the Xiong’an region can now receive their salaries directly to their digital wallet. The PBoC hopes that this will greatly simplify the payouts of salaries. China is one of the leading countries when it comes to the digitization of their national fiat currency. First pilot tests were already conducted in April 2020, using a centralized database to keep track of account balances. With China’s national Blockchain Service Network, the country wants to hand over the CBDC to a private blockchain.
CBDC Yea – Cryptocurrency Nay
As it seems, China apparently favors their CBDC over cryptocurrencies, which are being put under increasing regulatory scrutiny. Last month, the Chinese State Council implemented a complete ban on crypto mining. Cryptocurrency users who violate the new law risk a penalty to their social credit score, while the population is incentivized to report activities that hint at mining operations.
Naturally, countries that want to hold on to their fiat currency take a sceptical stance towards crypto, as private digital currencies can provide a better store of value than any inflationary national currency, especially when interest rates are low. When a large percentage of the population adopts cryptocurrency to secure themselves against this inflation, this might undermine the sovereignty of the national currency.
In contrast, other countries like El Salvador, Panama, and Paraguay have realized the advantages of a currency that has a predictable inflation rate. The three South American countries have recently announced their plans to adopt Bitcoin as legal tender.