Digital currency salary payments withdrawn by teachers instantly! M0 cash has grown for two consecutive years; card freezing, 'ocean fishing' law enforcement, and tax audits force people to hoard paper money! Tax base collapse makes even universities distrustful; Digital Currency 2.0 turns into bank deposits to exchange for the central bank's general ledger! Salary locking could go online at any time; a three-way deadlock between the public wanting freedom, banks wanting interest margins, and the CCP wanting the ledger!

Recently, universities such as Yangzhou University and Nantong University have started piloting the distribution of salaries using digital RMB, which led faculty and staff to cash out instantly on the very same day. Meanwhile, M0 cash has shown double-digit growth for two consecutive years, reflecting that ordinary people prefer to hoard cash due to risks such as bank card freezes, cross-regional law enforcement (known as "deep-sea fishing"), and retroactive tax inspections. The article analyzes the architectural evolution of digital RMB from 1.0 to 2.0, pointing out that the CCP attempts to exchange the central bank's general ledger and global payment monitoring by converting digital currency into ordinary bank deposits. However, under the three-way constraints of ordinary people seeking freedom, banks protecting interest rate spreads, and the CCP wanting the ledger, this policy has fallen into an irresolvable dilemma.

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Observe things as they are, and refuse casual cognition. You may all have been paying more attention recently to China starting to pay salaries in digital RMB, because recently there are many people asking about this in the comment section. So today, let's talk about this matter. First, what is it? The origin of this matter first started when Yangzhou University issued a notice, which meant that starting from November of this year, the salaries of all established personnel in the school would be entirely issued in the form of digital RMB. Three days later, Nantong University followed suit, and even more fiercely, separated the salary card and the performance card into two separate cards, and each card had to independently bind a digital RMB wallet. What is this? Isn't this just the CCP, in a year of tax base collapse, using a new accounting method to harvest the last bit of invisible capital flow belonging to the ordinary people? By the way, let's also take a look at why digital currency is like a zombie placed in an open-air coffin—usually it's exposed there, and then from time to time, who knows when, hey, this zombie occasionally twitches there.

I am telling you all, because this pot of rice is something the CCP cannot push forward, yet it dares not stop the fire either. No need to look at anything else, let's look at one number first. After looking at it, everyone will understand what is going on. The People's Bank of China released a set of data on October 14 this year: at the end of September, cash in circulation—hey, that is M0, the balance of M0—was 15.02 trillion, a year-on-year increase of 10.6%, and throughout last year, the growth rate of M0 steadily remained between 10% and 12%. Look at this, in the same table, the year-on-year growth rate of narrow money M1 is 3.2%, and the year-on-year growth rate of broad money M2 is 7.2%. So what does this set of data mean? It means that in a country where QR code payment has become widespread down to vegetable-selling grandmas, the growth rate of cash in the hands of ordinary people is 1.5 times that of broad money, and more than three times that of narrow money. Oh right, there is another layer to this: starting from January 1st this year, digital RMB has been moved out of M0, so this 10.6% growth rate is purely paper money and pure coins.

Everyone sees it, right? Double-digit growth for two consecutive years. So why are ordinary people starting to hoard cash so enthusiastically? Doesn't this data completely upend people's perceptions of this powerful nation? QR-code payments have almost become the calling card the Chinese Communist Party (CCP) uses to brag to the outside world, so why is cash flowing back into circulation now? We can basically conclude that the extra cash is not being taken out to be spent. What is it for? It is being taken out to be hidden. What about the interest on hidden cash? Ah, although there is no interest right now, putting it in a demand deposit only yields an annualized return of 0.05%, so in terms of returns, there is almost no major difference between the two sides. But where does the difference lie? The difference lies entirely in the risk. Let's first look at the risks of the money in ordinary people's accounts. If the money is kept in the CCP's banking system right now, it is simply riddled with landmines everywhere. Let's look at the data: in the past year alone, CCP banks cut off cards in the name of anti-fraud, freezing nearly 200 million phone cards and 400 million accounts. As long as you receive a single payment that the CCP deems to be fraud-related, your entire card is completely ruined, equivalent to being locked down on the spot. Not to mention that there were more than 4,500 long-arm fishing cases last year; out-of-province police stations, such as those in Inner Mongolia, didn't even need to go through a court—they could cross-provincially move these accounts on their own authority.

Coupled with this, taxation is now staring down private accounts like a crown prince, routinely launching retrospective audits stretching back decades. But paper currency has none of these pitfalls. M0 has risen for two consecutive years, which is the trust score ordinary people have given to the CCP's banking system. Since ordinary people are all withdrawing into cash, what did the CCP do? It turned right around and drove people into a place even more strictly controlled than ordinary bank cards. Why is it in such a rush to make a move now? Ah, just take a look at the fiscal and tax ledger and everything becomes clear. National tax revenue last year barely squeezed out a growth of 0.8%, but in the first nine months of this year, national tax revenue suddenly surged to just over 14 trillion, a year-on-year surge of 6.1%. Did the economy suddenly get better? Quite the contrary: if you look at deed tax and land value increment tax, which represent the baseline of real estate and the physical economy, they both plummeted by 14.5%. So where was this extra tax scraped from? Ah, look at individual income tax; tax collection and administration in this sector surged by 14.1%. To put it bluntly, this wasn't grown from the tax base at all—the iron fist of the CCP's tax audits came crashing down. Following the tax collection and administration line, the end of the year before last saw the nationwide rollout of something called digital electronic invoices. What is this thing equivalent to?

It completely locks down all invoicing transactions. Moreover, the State Council of the CCP issued Order No. 810 last year—everyone remembers this, right? It forced major e-commerce platforms to hand over sellers' identities and cash flows on a quarterly basis. However, after casting these two massive nets, the tax bureau discovered a huge loophole: as long as you don't issue invoices and don't go through platforms, when ordinary people use private bank cards, WeChat, or Alipay to receive money, the ledgers remain scattered among hundreds of banks and payment institutions. At this point, the tax authorities can only investigate them one by one after the fact, so tax avoidance in the private sector takes advantage of the loophole of private card collections and unrecorded cash. And this large chunk is the final invisible blind spot in the CCP's tax collection sky net. In addition to blind spots in tax collection, ah, there are still blind spots in spending money, as a large chunk of fiscal allocations sent outward also contains invisible blind spots. Just this September, the Jiangsu Provincial Government issued a document with a rather strange name: Implementation Opinions on Zero-Based Budget Reform. What does this thing do? It requires that wages, allowances, engineering projects, and enterprise subsidies distributed to individuals must all be reissued using the digital RMB.

What might confuse people the most is what on earth zero-based budget is. It means that all expenditures will no longer be increased by a growth rate based on the previous year's base figure. What was it like before? Suppose the budget last year was 10,000 yuan, and then this year a 3% increase is added on top of last year's, making this year's budget 10,300 yuan. But after changing to a zero-based system, the base figure starts directly from zero, and the allocation must be re-verified based on the actual on-duty status of personnel and the actual progress of the project. Under the traditional payroll distribution system, this set of things simply cannot be executed, because what was the previous process? The finance department would allocate funds to the public accounts of universities, and once allocated, the money would go directly into the school's accounts. But the Ministry of Finance could not see who every single allowance was distributed to, nor could it see whether research funding was sleeping in these intermediary accounts. To put it bluntly, what is exposed amid the fiscal collapse is mutual distrust within the CCP, as well as the CCP's central bank seeking to expand digital power. What is the reality? On the tax collection side, they simply cannot control private account collections and cash transactions, and on the allocation side, they cannot control how the money is actually spent once it reaches subordinate units.

What does this indicate? On the one hand, the CCP's finances are truly so tight that the original budget scheme—meaning that algorithmic approach where the technology simply forms a straightforward increase—can no longer bear it. On the other hand, what else can we see? It is that whenever the fiscal authorities allocate money outward, the CCP has reached a state of complete distrust. Therefore, the use of the digital RMB solves precisely these two issues. You say that under this kind of credit environment, when even universities are guarded against and the financial authorities cannot even trust universities, I truly don't know how this economy can go on playing? The transaction costs have truly exploded to the peak.

Alright, now let's talk about what exactly this Digital Yuan 2.0 is. Why did it 'resurrect' after the 1.0 version went dead? First, let's look at the differences in accounting. From 2022 to last year, what was the positioning of the digital yuan? It was M0. In the 1.0 era, the digital yuan in your wallet—let's call it 'e-CNY' for short—was directly on the central bank's balance sheet, meaning it was a direct liability of the central bank. At that time, every yuan that entered this wallet was converted from bank deposits. Once converted, the bank could no longer count this money as a deposit, let alone lend it out, and of course, it earned no interest. Three contradictions were welded together here. What were they? What was the structural cost of the system at that time? For every yuan a bank pushed into e-CNY, it lost a yuan of deposits; pushing e-CNY was equivalent to pushing its own deposit outflow. So, the positioning of e-CNY at that time was cash, and it was not allowed to bear interest. The rational action for someone receiving a salary was to immediately transfer it back to their bank card.

Not only that, but banks also had to bear all the costs of system development and merchant expansion, yet this money was not on their balance sheets, and there was no fucking profit model. Under these circumstances, who wouldn't think it was a stupid idea? So, 1.0 just lay dead. Now that 2.0 has 'resurrected,' how is this zombie moving? By the end of last year, the central bank didn't even dare to publish a formal document in full; they just let Deputy Governor Lu Lei publish an article to reveal the bottom line, announcing that starting from New Year's Day this year, they would officially switch to the 2.0 plan. What was the core change? It can be summed up in one sentence: the money in the commercial bank's digital wallet is no longer counted as a liability of the central bank; it has become the commercial bank's own deposit liability. In plain language, the digital yuan has changed from the central bank's electronic cash to the bank's ordinary demand deposits. Well, you have to pay reserve requirements, and you have to join the deposit insurance. The six major banks immediately started paying interest on these real-name wallets at a demand deposit rate of 0.05%. What banks want is the qualification to count the e-CNY balance as on-balance-sheet demand deposits. Payroll distributions for universities, hospitals, and government agencies have always been the low-cost core deposits that banks fight most fiercely for.

In other words, the fresh water from the fiscal source is now directly welded to the liability side of the banks. Furthermore, during this 'resurrection' of 2.0, there was a very clear definition change: payment platforms like WeChat were explicitly redefined as payment and service channels. What is the characteristic of e-CNY payment? It is payment and settlement, which objectively bypasses the platform's intermediary role. This creates a side effect: the transaction data that platforms have been intercepting for over a decade now returns to the hands of banks and the central bank. And what is the cost for the CCP's central bank? The CCP's central bank has given up control over e-CNY as its direct liability, but in exchange, it has gained the e-CNY system at the central bank level. The essence of the 2.0 system is distribution. How is this distribution illegal? Well, it traps money in banks, lets data leave the platforms, and incidentally keeps the ledger at the central bank. So, the institutional design of 2.0 is essentially just this. How is the ledger recorded? Let's walk through a salary payment in e-CNY from start to finish, and everyone will understand.

This process is as follows: the budget unit first issues a payment instruction in the integrated fiscal budget system, then the state treasury transfers the funds to the agent operating bank. The operating bank records a deposit in the employee's real-name wallet on its own ledger, and at the same time, the bank records a liability. Meanwhile, the central bank's system generates a corresponding 'coin string.' A coin string is data containing the denomination, the holder's wallet identifier, and, of course, the issuer's signature. This is the digital yuan. Let's look at the personal payment link in this process. For example, if an employee goes to a supermarket and pays the merchant, the bank where the employee's wallet is held must deduct the payment amount, and the bank where the merchant's wallet is held increases this transfer. This process looks the same as traditional settlement, but in reality, it is completely different. Previous interbank settlement was settled in a batch at the end of the day. What does that mean? For example, throughout the day, Bank A transferred 1 million to Bank B, and Bank B transferred 800,000 to Bank A. This is the daily volume, a sum of various small remittances.

At this point, Bank A has a 200,000 gap against Bank B, meaning Bank A has a net exposure of 200,000 to Bank B. How is this 200,000 exposure settled? It is simply done by transferring 200,000 from Bank A's account at the central bank to Bank B's account at the central bank. But what is it now? The clearing of this payment between the two banks can be completed directly at the central bank level. That is to say, it clears every small payment. Consequently, the central bank obtains the entire lifecycle of every coin string from generation to cancellation, as well as the transfer relationship between wallets. This is a global transaction map, and therefore, a global monitoring of payment links. With the ledger in hand, what big move is the CCP central bank planning? In late October, the Chinese central bank officially unveiled the master backend, centralizing all eight major authorities—including currency issuance, wallet management, risk control, and smart contracts—under the central bank. Then, it allowed thirty commercial banks to connect directly.

Because this is not an ordinary settlement system at all, but a super-console that can reach directly into every individual's wallet. What is its most core rule called? Its most core rule is called mandatory execution. In other words, the Chinese Communist Party (CCP) central bank is giving itself a god-like permission: the moment a trigger condition is met, the code can automatically deduct or return funds, and no one can intervene at that point. To put it more clearly, how will money flow from now on? The code has the final say, not the person holding the money. What can this console do? The matter of consumption vouchers has already been rehearsed. When Shenzhen previously issued these digital currency red envelopes, it locked the merchants and the expiration date, and they would become void upon expiration. Therefore, this is a currency for limited-time scenarios. Why can the CCP central bank do this now? The key lies in the fact that the lock is welded directly onto the money. If you parallel this set of code onto salary cards without changing even a single line of code, you can write programs at any time specifying that money must be consumed within the province within 90 days, or preventing it from entering the stock or property markets, or automatically returning overdue funds to the state treasury—these programs can be completely written into this code string. Even the CCP's own scholars inside the system are calling for one thing: strictly prohibiting the addition of regional locks or expiration locks to civil servants' salaries. But everyone must know that things that need to be explicitly prohibited are precisely the things that can be done technically at any time, and as long as the CCP can do it, it cannot resist using this tool. But what is bizarre? Well, the transaction volume of this contract system has only reached 316 million so far, which is less than one-hundred-thousandth of the total digital currency circulation of 31 trillion. Based on my understanding of the CCP, the pipes have all been laid, but they are not releasing the water; they are most likely plotting something big. Just look at the first three quarters of this year: entity loans decreased by more than 3 trillion year-on-year, social financing relied entirely on the hard support of 10 trillion in government bonds, and the corporate and resident sectors simply stopped borrowing money. In other words, the traditional money-printing transmission chain has already broken, and digital currency contracts can directly bypass bank credit. When the day comes that monetary transmission completely fails, every penny hit into your wallet when salaries are paid in the future may come welded with an expiration date, plus merchant whitelists, usage restrictions, and even the money for paying social security could be codified. This is the real trump card of turning digital currency into deposits and reclaiming contracts back to the central bank.

Well, let me continue. Since all the equipment is ready, why is it currently a half-cooked meal? If we put a few sets of contradictions together, it becomes very clear. What are ordinary people doing now? They are afraid of frozen accounts and tax audits, preferring to withdraw cash to hide under their beds rather than enter this digital currency. The central bank of the CCP wants to lure people in by giving interest that is like a beggar's handout, but this interest cannot be raised because commercial banks' own interest spreads are almost wiped out, and they simply cannot afford this high interest rate. Since enticement doesn't work, the CCP is left with only administrative, compulsory quotas. As a result, schools just issued salaries using digital currency, and teachers clicked on free withdrawal the very same day, turning right around and transferring everything back to ordinary bank cards. Everyone sees this, right? These four links are now biting each other.

Let's first look at the interest. If real-name wallets accrue interest on a demand basis, it is 0.05% annually; if you put 10,000 yuan in for a year, the interest is 5 yuan. Meanwhile, Category 4 anonymous wallets do not accrue interest. Here you can see one thing: the CCP's pricing of privacy. Look, the interest rate spread between real-name and anonymous is only 0.0005, while ordinary people's pricing of privacy is given by M0. Ordinary people would rather take zero-interest cash than this 0.05% account, which shows that ordinary people's pricing of the risk of account transparency is at least higher than 0.05%. If you place digital currency side by side with a bank card, both sides offer 0.05%. One side is an ordinary deposit that can be spent however you want, and the other side is what? It is a handcuffed deposit where every single flow, from where it is spent, is tightly controlled in the background by the central bank. Yet the returns are exactly the same, while the degree of freedom is unidirectionally decreasing. No normal person would actively move their money under this quote.

You might wonder, hey, since the central bank wants to induce everyone to use it, why doesn't it offer high interest? Because it can't afford to, this is not an issue of attitude, but a structural problem of version 2.0 of the digital currency. What are we looking at? Look at this interest spread structure. At the end of the second quarter of this year, the net interest margin of commercial banks was left with only 1.25% to 1.3%. You must know that at the end of 2021, this figure was still 2.08%. And a net interest margin of 1.25% compared with the 1.4% policy rate of the seven-day reverse repo is still fucking inverted. Then the life of banks is easy to calculate, because the life and death of banks are all tied to whether the liability side can get cheaper deposits. This is why the six major banks scrambled to issue digital currency salaries for universities. Then let's do a thought experiment, the balance of the digital currency wallet after version 2.0 is the deposit liability of the bank. If the Chinese central bank lets the digital currency record this 1.5% interest, what will happen? If it really does this, what will happen? Depositors will definitely transfer the money in current accounts into the digital currency wallet of the same bank, and at this time the total liability of the bank does not change by a single penny, but this part of the cost will suddenly jump from 0.05% to 1.5%. Let's calculate based on current deposits accounting for one-third of total deposits, the liability cost at this time will directly raise one-third of 1.45%, which is about 0.5 percentage points, and the net interest margin at this time will immediately be pressed from 0.25% directly below 0.75%. So what is version 2.0? It is using the abandonment of central bank liabilities in exchange for the cooperation and promotion of banks, and the price is that digital currency can never be more attractive than deposits, because digital currency is now a deposit.

Looking again at the question of where this money goes after salary distribution, the notification of Yangzhou University itself clearly stated that because withdrawing from the digital currency wallet back to the ordinary bank card is free of charge, hey, and it arrives in real time. Then after receiving this digital currency, the faculty and staff will definitely transfer it back, hey, transfer it back along the original route to the original salary card, because this script was already performed once in Changshu in 2023. At the beginning of May 2023, the full amount of this digital currency began to be issued to the establishment civil servants and public institutions. What was said when receiving this salary at that time? It was said that after receiving this digital currency salary, it could be immediately withdrawn to the bank free of charge, and as usual, money could be spent on bank Alipay and WeChat. Why does everyone withdraw cash in seconds now? Because transferring back does not cost money for the bank, but if the money is left in this digital currency wallet, then life cannot go on, because every month paying this mortgage, this car loan, and also paying this credit card, paying these utility expenses, are all deducted from that default bank card. This step is not connected with the digital currency wallet at all. Like Nantong University, which split the salary and performance into two wallets, oh, you still have to manually toss them into one, which is a typical example of taking off your pants to fart. Look, after transferring away, not a single penny is charged, and leaving it means every step is difficult, the digital currency issued this time is just going through the water, this is also taking off your pants to fart, it is just adding a layer of transfer trouble for ordinary people.

Let's take a look at whether there is any trading volume on this broken currency network? Still the data of the CCP itself, as of the end of October last year, personal digital currency wallets were 230 million. The national digital currency trading volume in September this year was 99.67 million transactions, which means that the average of each wallet every month is less than half a transaction. The caliber of Jiangsu is even more direct, let's look at the data of the PBOC Jiangsu Branch, as of the end of June this year, Jiangsu's existing wallets were 81.32 million, while monthly active wallets were only over 12.3 million, and the monthly active rate was only 15%, which means that 85% of the wallets are fucking sleeping. In the same Jiangsu, the new trading volume of digital currency in the first half of this year was 7 trillion, hey, a year-on-year increase of 215%, accounting for more than 80% of the country. Then let's look at this structure, 80% of the country's digital currency transactions are in one province, but 80% of the wallets in this province are motionless, then whose trading volume is made? Let's look at a single transaction again, in September this year, the number of national digital currency transactions increased by only 12% year-on-year, but the amount increased by 123% year-on-year, the average single transaction doubled from 9,400 a year ago to 18,800, the number of transactions did not move, but the amount doubled. Then what is increasing in volume? What is increasing in volume is wholesale transactions such as fiscal allocations and state-owned enterprise settlement, it is not the vegetable money of ordinary people.

Let's calculate this bad debt to the end, thirty banks spend fucking real money to build this system, the central bank of the CCP grandly set up two operation centers, and for every wallet opened by the bank, it has to subsidize interest and maintenance fees, and as a result, after tossing around for a long time, what is exchanged back is all transit accounts that are cashed out on the very day salary is issued. Then everyone may be confused, then who the fucking is making money? Hey, only the political achievement report perfunctorily dealing with things has made money. What does the CCP want to see? What it looks at is the number of account openings and trading volume, this is simple, it can be printed out by administrative orders. As for whether anyone is actually using this set of things, hey, does this matter? Right?

We can see a three-way constraint formed by these four sets of contradictions. What does the central bank of the CCP want? It wants to track exactly how every cent of your money is spent, and it must be able to lock this master ledger at any time. The common people want freedom, and the banks want interest rate spreads. If they use high interest rates to lure people, the banks will die first. But if they give the people freedom, then this ledger becomes completely meaningless to China. Therefore, in such a chaotic situation, if you don't push this piece of shit, then the control over the 2.0 ledger was changed for nothing. Now, what is the situation? Well, you don't dare to push it too hard because the people would lose this freedom without any corresponding compensation, so the people are withdrawing into cash. If you say the CCP doesn't push it, well, they are fucking unwilling to give up, so this is not a problem of the CCP's hesitation in execution; it is fundamentally unsolvable under the three-way constraint. So where is the way out? I think under this fucking CCP system, there is only one way out—the truth is always one—and that is to shift from voluntary to mandatory.

What might happen in the future? If the economy deteriorates further, the CCP is fully capable of handling wages or performance bonuses. They can require you to lock this portion in this wallet, set a time limit, restrict the merchants, forbid transfers, or simply do the opposite: put your account under 'shuanggui' (disciplinary detention). At a specified time and a specified place, not to confess your problems, but to force you to spend all the money, otherwise, they will make this money void. This is not a question of whether the CCP will do it, but rather, objectively speaking, these fucking idiots in the CCP are capable of doing it. This brings us to the Second Theorem of the CCP: as long as the CCP can do it, no matter how fucking damaging it is, as long as the reality continues to deteriorate, the CCP will definitely do it. And technically, there are no obstacles anymore; like the dual-wallet system at Nantong University, which has already separated performance bonuses, these are all technical preparations.

Finally, let's talk about the structure: why is this pot of rice bound to be half-cooked? Because the three people at the table have each taken something away: the CCP took the ledger, the people took the cash, and the banks took the deposits. So what is left in the pot in the middle? Nothing is left. The CCP doesn't lack technology, doesn't lack wallets, and doesn't lack administrative orders, but what it lacks is the most important thing: a reason for the people to keep their money inside. And this reason, well, it is exactly what the CCP itself has wiped away bit by bit using card-blocking, 'ocean fishing' (long-arm law enforcement), and retrospective investigations. So for the people, it's like this: there are a bunch of reasons not to put it in that wallet, but there is not a single fucking reason to put it in. This is the choice people make after transaction costs rise. When a regime consumes account trust to the point where people would rather hoard cash, and you then bring out a so-called more transparent account for everyone to move into, this is not a monetary upgrade; this is digging a new, deeper pit right next to the one you already dug yourself. If you hate someone, well, just tell them to put their money in this digital RMB wallet, got it?