New Policy Transforms Digital Yuan From Cash Alternative to Interest-Bearing Deposit Currency
China is preparing a significant shift in its central bank digital currency strategy, as authorities move to allow commercial banks to pay interest on digital yuan holdings. The policy, set to take effect on January 1, 2026, is designed to accelerate adoption of the e-CNY by making it more competitive with traditional bank deposits and popular mobile payment platforms.
Under the new framework, the digital yuan will evolve from functioning as a digital cash equivalent into what policymakers describe as a “digital deposit currency.” Verified digital yuan wallets held at commercial banks will become eligible for interest payments, aligned with existing deposit pricing self-regulation rules.
This marks a fundamental change in how the e-CNY operates within China’s financial system.
In addition, digital yuan balances will receive full protection under China’s deposit insurance scheme, placing them on equal footing with conventional bank deposits in terms of safety and credibility.
The policy also allows banks to integrate digital yuan balances more effectively into their asset-liability management frameworks, enhancing operational flexibility. For non-bank payment institutions, digital yuan reserve funds will continue to be subject to a 100% reserve requirement, consistent with current customer reserve rules.
As of the end of November 2025, China had processed 3.48 billion digital yuan transactions, with a cumulative value of 16.7 trillion yuan ($2.38 trillion). Despite this scale, everyday consumer adoption has lagged behind dominant platforms offering seamless payments and financial incentives.
The interest-bearing feature is part of a broader push to expand both domestic and cross-border use of the digital yuan. Authorities are advancing international pilots and infrastructure to raise the global profile of the Chinese currency, even as cryptocurrency trading and mining remain prohibited domestically.
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