China Introduces Interest Payments to Boost Digital Yuan

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China’s central bank announced a comprehensive overhaul of its digital yuan framework this Monday. Starting January 1, 2026, commercial banks will begin paying interest on digital yuan holdings, a major policy shift for the state-backed digital currency project after a decade of development.

Deputy Governor Lu Lei outlined the change in a state newspaper article, explaining that the e-CNY will formally transition from “digital cash” to a “digital deposit currency.” This redefinition aims to integrate the currency more deeply into the financial system and enhance its appeal to the public.

The overhaul comes after years of pilot programs aimed at promoting the digital yuan, which is considered one of the world’s most advanced central bank digital currencies. Despite strong governmental support since its 2019 pilot launch, widespread public adoption has remained an ongoing challenge for authorities.

Under the new system, verified digital yuan wallets will earn interest aligned with existing deposit pricing rules. Balances will also be protected by China’s deposit insurance system, offering security equivalent to traditional bank deposits. Additionally, banks gain more flexibility to manage these balances within their asset-liability operations.

For non-bank payment institutions, digital yuan reserve funds will be subject to a 100% reserve ratio, treated identically to current customer reserve requirements. Lu disclosed that as of late November 2025, China had processed 3.48 billion e-CNY transactions totaling 16.7 trillion yuan ($2.38 trillion).