Chinese Embrace Digital Yuan for Tax Payments, Adoption Grows

China's digital yuan is increasingly finding its place among Chinese citizens and businesses for tax payments, according to the Hunan Province's Tax Bureau and the Changsha Central branch of the People's Bank of China (PBoC).

Between January and June 2023, individuals and companies in Hunan Province have effectively utilized the digital yuan to settle a total of $51.3 million in taxes, spanning 794 transactions.

The primary platform for these transactions, with 754 instances, was the digital yuan tax payment system managed by the Postal Savings Bank's Hunan Branch.

Notably, this bank, predominantly owned (69%) by China Post, the state-run postal service, processed nearly 99.58% of the province's overall digital yuan tax payments.

A group of domestic and international public and private entities holds a 17% stake in the bank.

What is the digital yuan and how does it work?

The digital yuan is China's central bank digital currency (CBDC), a form of digital money issued and regulated by the central bank, the People's Bank of China (PBoC). It operates similarly to physical cash but in digital form.

People can hold and transact with digital yuan using their smartphones or other electronic devices.

Why are businesses and individuals in Hunan Province using the digital yuan for tax payments?

Businesses and individuals in Hunan Province are adopting the digital yuan for tax payments due to its convenience and integration into existing financial systems.

The Postal Savings Bank's Hunan Branch has been a key ally of the PBoC in driving e-CNY adoption. It was among the earliest banks to develop an "offline" digital yuan wallet solution.

The branch pioneered CBDC-powered tax solutions in the province, allowing individuals and companies to cover an extensive range of state levies using the digital token.

Additionally, the bank offers digital yuan tax refund services for local and national tax offices.

Looking ahead, the Hunan Branch of the Postal Savings Bank aims to refine the digital yuan payment experience for its customers while actively supporting the ongoing digital yuan pilot program.

Changsha, a prominent city in Hunan Province, was included in the digital yuan pilot zone in April 2021. Just recently, city authorities reported that over 420,000 merchants in Changsha now accept CBDC payments.

Earlier in February, it was stated that 300,000 merchants in the city were facilitating payments with the digital yuan.

Furthermore, digital yuan promotional initiatives have garnered substantial attention.

Reports indicate that the usage of e-CNY promotional discount coupons surpasses 90%, even reaching as high as 99% in certain regions, reflecting the growing interest in the digital currency across China.