From 1 January, the Chinese Central Bank will allow interest to be paid on the digital yuan. To boost adoption and usage, banks will be able to pay interest to wallet holders, effectively turning the e-CNY into a savings product. As Deputy Governor Lu Lei explains in his article in today’s Financial Times, this new action plan elevates the currency from “digital cash” to “deposit money.”
Benefits for Digital Yuan Holders
This initiative culminates work begun by the People’s Bank of China in 2014 and formalized with a public launch in April 2022. The digital yuan is now undergoing its most significant transformation yet.
The system initially failed to meet market expectations due to its design: as a simple digital equivalent of cash, it generated no interest. Beijing has addressed this by integrating the currency into the reserve requirement system, radically enhancing its attractiveness.
Deputy Governor Lu Lei emphasizes the paradigm shift: “The digital yuan will move from the era of digital cash to that of digital deposit money.”
In practice, portfolios held with commercial banks will now earn interest, similar to traditional bank deposits. Banks must pay interest on registered digital RMB wallets in accordance with the self-regulatory agreement on deposit interest rate pricing, allowing savers’ assets to grow through official remuneration.
Commercial Banks, Key Pillars of the System
This reform also eases concerns in the traditional banking sector, which feared being bypassed by cryptocurrencies. China is placing banks at the heart of the system.
“Commercial banks are key players; their services support the entire life cycle of digital currency. In fact, they have become the guarantors of digital currency,” the deputy governor explains.
e-CNY funds consolidate bank balance sheets and, like traditional savings, benefit from regulatory protections, including deposit insurance.
A Hybrid Technology: Pragmatism Meets Blockchain
Technically, China has opted for a hybrid approach. The objective is to serve the real economy rather than develop technology for its own sake. The system retains account management for efficiency while integrating blockchain and smart contract advantages.
For Chinese authorities, this fusion represents the future of payments. The integrated use of digital technologies enables the digital yuan to move from electronic payments to fully digital payments.
The infrastructure already facilitates programmable payments and instant cross-border settlements. By the end of November 2025, it had processed 3.48 billion transactions, demonstrating resilience and scalability.
Regaining Control Over “Shadow Banking”
China is also accelerating the digital yuan rollout to regain control amid the rise of private stablecoins and unregulated virtual assets, which create a risky parallel system.
Deputy Governor Lu Lei warns: “They all take the form of payment instruments, which objectively creates and promotes the circulation of various emerging ‘currencies’ outside the financial system.”
By making the digital yuan attractive and secure, China aims to repatriate liquidity to the formal system. International ambitions are also evident through the mBridge project for cross-border transactions, facilitating trade and investment while promoting institutional openness.
As 2026 approaches, the People’s Bank of China’s message is clear: it is time to “be proactive and quickly establish what needs to be established” while ensuring financial stability. The digital yuan is no longer an experiment; it is now the cornerstone of China’s financial strategy.
Source: Financial Times
