China Overhauls Digital Yuan: E-CNY to Earn Interest and Align with Bank Deposits

The People’s Bank of China (PBOC) has announced a major strategic shift for its central bank digital currency (CBDC), transitioning the digital yuan (e-CNY) from mere digital cash to a "digital deposit currency." Starting January 1, 2026, commercial banks will begin paying interest on digital yuan holdings, a move intended to spark mass adoption after a decade of experimentation.

Key Changes to the Framework

According to PBOC Deputy Governor Lu Lei, the new framework will integrate the e-CNY more deeply into the traditional financial system:

• Interest Payments: Verified digital yuan wallets will now earn interest, similar to traditional savings accounts.
• Deposit Protection: E-CNY balances will be officially covered by China’s national deposit insurance system.
• Bank Flexibility: Commercial banks will gain the ability to manage digital yuan as part of their standard asset and liability operations, while non-bank payment platforms must maintain a 100% reserve ratio.

Driving Adoption Amid Competition

Despite being one of the world's most advanced CBDCs, the digital yuan has struggled to compete with dominant private payment giants like Alipay and WeChat Pay. As of November 2025, the e-CNY has seen 3.48 billion transactions totaling approximately $2.38 trillion, but the government is pushing for more.

Global Ambitions

The PBOC is also looking beyond its borders to increase the currency's influence:

• Cross-Border Pilots: New initiatives are planned with Singapore, Thailand, Hong Kong, the UAE, and Saudi Arabia.
• International Hub: A new international operation center was recently launched in Shanghai to facilitate global use.

While China continues to aggressively advance its state-backed blockchain technology and CBDC, its strict ban on private cryptocurrency trading and mining remains firmly in place.

December 2025, Cryptoniteuae