China is preparing for one of the most extensive policy changes in its digital yuan project. With a new decision by the People’s Bank of China, commercial banks will be allowed to pay interest on digital yuan balances. The system will transition to a new operation starting January 1, 2026. Despite nearly a decade of trials, the adoption rate has remained limited, and this regulation aims to increase it. Officials highlight that the change fundamentally redefines the digital yuan’s position within the financial system.
Transformation into “Digital Deposits”
Lu Lei, Deputy Governor of the People’s Bank of China, emphasized in an article in the state-run Financial News that the digital yuan will no longer be seen merely as digital cash. With the new framework, the e-CNY will gain the characteristic of a “digital deposit currency” with interest yields. This shift brings the digital yuan closer to traditional bank deposits and aims to enhance its attractiveness for users.
Under the system set to be implemented on January 1, 2026, commercial banks will be able to pay interest on verified digital yuan wallet balances. The interest rates will align with existing self-regulatory agreements concerning deposit pricing. Additionally, digital yuan balances will be protected under China’s deposit insurance system, offering similar guarantees as traditional bank accounts.
The regulation not only affects individual users but also impacts banks’ balance sheet management. Banks can treat digital yuan balances as part of their asset-liability management strategy. For non-bank payment institutions, digital yuan reserves will be considered equivalent to existing customer funds, with a 100% reserve requirement.
Adoption Challenges and International Expansion
Despite its technical maturity, the digital yuan faces challenges from strong domestic competitors. Established mobile payment systems like WeChat Pay and Alipay dominate China’s cashless payment ecosystem. The central bank’s decision to allow interest payments aims to position the digital yuan as a value storage tool beyond everyday transactions.
Official data reveals that by the end of November 2025, 3.48 billion transactions were conducted with the digital yuan, totaling 16.7 trillion yuan (approximately 2.38 trillion USD). However, officials acknowledge these figures fall short of potential. The new regulation is seen as a critical milestone for the digital yuan to secure a more permanent place in the financial system.
China is also accelerating the cross-border use of the e-CNY. In addition to a planned pilot project with Singapore, the central bank aims to promote CBDC-based payments in markets such as Thailand, Hong Kong, the United Arab Emirates, and Saudi Arabia. The e-CNY International Operation Center opened in Shanghai is part of a strategy to enhance the yuan’s global influence. Amid these initiatives, it’s noteworthy that the ban on crypto trading and mining in mainland China continues.
