Chinese Central Bank Orders Interest Payments: Digital Yuan Enters a New Phase

Starting from January 1, 2026, the landscape of the digital yuan will experience a significant shift toward mainstream cash. The People’s Bank of China (PBOC) has announced a fundamental transformation of its central bank digital currency: commercial banks will be required to start remunerating the balances that users hold in their verified e-CNY wallets.

From Digital Cash to Digital Deposit

This is a strategic evolution of the original concept. While the digital yuan previously functioned as a direct equivalent of traditional cash, the new framework repositions it as a “digital deposit currency,” aligning with current self-regulation agreements on deposit rates.

Lu Lei, Vice Governor of the PBOC, emphasized that this change places e-CNY balances under the same protection offered by conventional deposits through the Chinese deposit insurance system. The formal announcement was made on December 29, consolidating a decade of research and pilot testing.

Progress in the Two-Tier Architecture

The PBOC maintains its decentralized but supervised operational model. The central bank sets the rules and technical standards, while commercial banking institutions directly manage the end-user experience. This dual structure has allowed e-CNY to become one of the most developed central bank digital currencies worldwide.

A Decade of Progress Toward Adoption

The official pilot program began in 2019, but development efforts started years earlier. The Chinese government has launched multiple initiatives to promote its adoption, from innovative payment solutions to smart contracts.

In 2023, Changchun Mu, Director of the PBOC Digital Currency Research Institute, emphasized the crucial role of wallet providers in expanding transaction options in retail spaces. Subsequently, the first industrial park dedicated to the development of the digital yuan was established in Luohu, Shenzhen, where physical wallet initiatives and e-CNY promotion converge.

Although adoption has faced challenges, this new incentive structure marks a turning point in the Chinese central bank’s strategy to establish its CBDC as a comprehensive financial instrument.