China is taking a major step to boost the use of its digital currency by allowing banks to pay interest on digital yuan holdings, marking a significant shift in the country’s long-running central bank digital currency project.
The People’s Bank of China (PBOC) announced that the digital yuan, officially known as the e-CNY, will move beyond its current role as a digital version of cash. Under a new framework set to take effect on January 1, 2026, the e-CNY will operate more like a digital deposit currency, according to Lu Lei, a deputy governor of the central bank.
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In an article published by the state-backed newspaper Financial News, Lu said the overhaul follows more than a decade of research, pilots, and real-world testing. China is widely seen as a global leader in central bank digital currency development, yet widespread adoption of the e-CNY has remained elusive since official trials began in 2019.
Interest payments and deposit protection
Under the new system, commercial banks will be permitted to pay interest on verified digital yuan wallets. The interest rates will align with existing self-regulatory rules on deposit pricing. In a move likely to reassure users, digital yuan balances will also receive the same level of protection as traditional bank deposits under China’s deposit insurance scheme.
The changes give banks more flexibility to incorporate digital yuan balances into their broader asset and liability management. For non-bank payment institutions, digital yuan reserve funds will be treated in line with current customer reserve requirements, with a full 100 percent reserve ratio applied.
Lu noted that usage of the digital yuan has already grown steadily. By the end of November 2025, China had processed 3.48 billion e-CNY transactions, with a total value of 16.7 trillion yuan, or about $2.38 trillion.
Renewed efforts to expand usage
The policy shift comes as Chinese authorities step up efforts to make the digital yuan more attractive in a highly competitive payments market. Mobile platforms such as WeChat Pay and Alipay continue to dominate everyday transactions, leaving the e-CNY struggling to gain a similar level of public acceptance.
In recent months, the PBOC has signaled a broader push to expand the digital yuan’s reach beyond China’s borders. The central bank has pledged to explore cross-border pilots, including a planned initiative with Singapore, and to promote digital yuan payments with partners such as Thailand, Hong Kong, the United Arab Emirates, and Saudi Arabia.
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China has also established an e-CNY International Operation Center in Shanghai, launched in September, as part of its efforts to increase the global presence of the yuan.
A controlled approach to digital finance
While China continues to invest heavily in blockchain-based financial infrastructure, it maintains strict controls over private cryptocurrencies. Trading and mining of cryptocurrencies remain banned on the mainland, underscoring the government’s preference for state-managed digital finance solutions.
