China is set to allow commercial banks to pay interest on digital yuan holdings starting January 1, 2026. This move aims to boost adoption of the digital currency and deepen its role within the country's financial system.
The decision comes after a decade of development and pilot programs. Lu Lei, the deputy governor of the People's Bank of China (PBOC), outlined the changes in an article published in Financial News, a state-run newspaper. According to Lu, this initiative will reclassify the e-CNY from functioning as digital cash to operating as a "digital deposit currency," signifying a major shift in the project's underlying legal and technical framework. The overhaul will give the digital yuan the same legal status as deposits held at commercial banks.
The PBOC has issued a new "action plan" that will allow banks to pay interest on verified digital yuan wallets in accordance with existing self-regulatory agreements on deposit pricing. Digital yuan balances will also receive full protection under China's deposit insurance system. Banks will have more operational flexibility to manage digital yuan balances as part of their broader asset and liability operations. For non-bank payment institutions, the digital yuan reserve funds will be treated like existing customer reserve requirements, with a 100% reserve ratio applied.
Lu Lei described the future digital yuan as "a modern digital payment and circulation means issued and circulated within the financial system, with technical support and supervision provided by the central bank". It will possess the attributes of commercial bank liabilities, be account-based, compatible with distributed ledger technology, and have the functions of monetary value, store of value, and cross-border payment.
China plans new cross-border pilots with Singapore, Thailand, Hong Kong, the UAE, and Saudi Arabia to extend digital yuan use beyond domestic retail payments.
By November 2025, the digital yuan had processed 3.48 billion transactions totaling 16.7 trillion yuan ($2.3 trillion) since its 2019 pilot launch. The central bank has also recently established a new center in Beijing to oversee digital yuan operations. This initiative aims to increase adoption while preserving financial stability and central bank control.
