China's Digital Yuan Gets Major Upgrade: Interest-Bearing Accounts Coming in 2025

digital_archaeologist · 2026-01-16T12:06:42+00:00

China's digital currency strategy is evolving with a new framework for the digital yuan, transitioning from digital cash to digital deposits by 2025. This change aims to encourage broader adoption through interest payments and aims for global leadership by establishing an international operations center in Shanghai.

digital_archaeologist

2026-01-16 12:06:42

Abstract generation in progress

China is making a significant shift in its digital currency strategy. Starting January 1, 2025, the People’s Bank of China will roll out an enhanced digital yuan framework that marks a fundamental evolution in how e-CNY functions within the financial ecosystem.

From Digital Cash to Digital Deposits

The most notable change involves the conceptual transformation of the digital yuan. Previously, e-CNY operated primarily as digital cash—a direct medium of exchange. Under the new framework, it will function as digital deposit money held within commercial banks, enabling interest payments on holdings.

This transition matters because it creates a financial incentive for broader adoption. By allowing banks to offer returns on digital yuan balances, the PBOC effectively competes with traditional savings instruments and encourages individuals and businesses to hold more of the currency in formal financial channels.

According to Lu Lei, a deputy governor of the People’s Bank of China, the modernized digital yuan will represent “a digital payment and circulation mechanism supervised by the central bank, with technical infrastructure supporting distributed ledger compatibility, serving as both a store of value and a cross-border payment solution.”

Strategic Expansion: Shanghai Takes Center Stage

Beyond domestic mechanisms, China is positioning itself for global digital currency leadership. The action plan proposes establishing an international digital yuan operations centre in Shanghai, signaling ambitions to extend e-CNY’s reach across borders and establish it as a credible instrument for international settlement.

The Bigger Picture

The PBOC’s digital currency initiative stretches back over a decade. What started as research under the DCEP (Digital Currency Electronic Payment) project in 2014 evolved into the official launch of e-CNY in April 2022. Since launch, the central bank has distributed digital yuan through targeted pilot programs to accelerate market penetration and user familiarity.

This latest framework represents the next maturation stage—moving from experimental distribution to structural integration within the banking system, complete with yield mechanisms designed to stabilize demand.

This page may contain third-party content, which is provided for information purposes only (not representations/warranties) and should not be considered as an endorsement of its views by Gate, nor as financial or professional advice. See Disclaimer for details.