China Digital Yuan Shifts to Interest-Paying Bank Money

Source: CryptoTale Original Title: China Digital Yuan Shifts to Interest-Paying Bank Money Original Link: China’s central bank will roll out a new Digital Yuan framework on Jan. 1, allowing commercial banks to pay interest on e-CNY holdings to boost usage and expand its role. The change moves the digital yuan from digital cash to digital deposit money, according to Lu Lei, deputy governor of the People’s Bank of China. Lu outlined the plan in an article published by the state-run newspaper Financial News, describing a major shift after years of pilot programs.

Action Plan Shifts Digital Yuan to Deposit Model

The “action plan” redefines the digital yuan as deposit-based money issued within the financial system and supervised by the central bank. The future e-CNY will function as a payment tool, store of value, and unit of account, while supporting cross-border payments.

The framework will rely on account-based management and remain compatible with distributed ledger technology. Under the plan, digital yuan balances will carry the attributes of commercial bank liabilities rather than cash equivalents.

Banks will pay interest on verified digital yuan wallets, following existing self-regulatory agreements on deposit pricing. At the same time, digital yuan balances will receive the same protection as traditional deposits under China’s deposit insurance system.

The policy also allows banks to manage digital yuan balances within broader asset-liability operations. For non-bank payment institutions, digital yuan reserve funds will follow existing customer reserve rules with a complete 100% reserve ratio.

Pilot History and Adoption Challenges

The PBOC initiated the Digital Currency Electronic Payment project in 2014, which was the beginning of its research on a central bank digital currency. After extensive testing in several cities, China introduced the digital yuan in April 2022.

To make the e-CNY a common currency, the government gave it through airdrops and ran pilot projects. However, the usage of e-CNY is still far behind private mobile payment platforms despite these efforts. Platforms such as WeChat Pay and Alipay continue to dominate China’s cashless payments market.

Lu said the overhaul follows a decade of experimentation and reflects lessons from extended pilot programs. There have been transactions involving the digital yuan amounting to 3.48 billion and a total of 16.7 trillion yuan, or approximately $2.38 trillion, being processed by China as of late November 2025. These numbers make the e-CNY one of the leading CBDC programs worldwide in terms of transaction volume.

Cross-Border Expansion and Policy Direction

Alongside domestic reforms, China has stepped up efforts to expand cross-border digital yuan usage. The PBOC pledged to promote international e-CNY payments through new pilot programs.

China plans a cross-border trial with Singapore. The central bank also aims to promote CBDC payments in Thailand, Hong Kong, the United Arab Emirates, and Saudi Arabia.

Lu said the plan includes establishing an international digital yuan operations center in Shanghai. China continues to focus on the official e-CNY rather than privately issued stablecoins used in other countries. Authorities have cited concerns over speculation, fraud, and financial instability when addressing private digital currencies.

The shift to an interest-bearing model raises one central question: can deposit-style incentives change user behavior in a market shaped by entrenched payment platforms?

The new framework will take effect in 2026 as China accelerates its digital currency strategy within domestic and cross-border financial systems.