The Digital Yuan Reform: Banks Will Now Pay Interest on e-CNY Deposits

The People’s Bank of China has revealed a new strategic orientation for the national digital currency through a policy document dated December 29. The most significant move involves the introduction of interest rates on digital yuan holdings at commercial banks, marking a substantial paradigm shift after ten years of experimentation.

From Digital Cash to Deposit Currency: The New Model

The key transition that the People’s Bank of China unveils with this update is the transformation of e-CNY from a simple digital equivalent of banknotes to a true deposit instrument, with protection guaranteed by the Chinese deposit insurance system. Lu Lei, vice governor of the central bank, clarified that digital yuan balances will benefit from the same protections applied to traditional deposits.

This transition will take effect on January 1, 2026, and represents a concrete response to the adoption challenges encountered in recent years. The operational structure will maintain a two-tier model: the People’s Bank of China will continue to set technical and regulatory standards, while commercial banks will manage direct relationships with end users. The introduction of interest on verified e-wallets follows current self-regulation standards for deposit rates, thus creating regulatory continuity.

A Decade of Development Toward Widespread Implementation

The official pilot program for the digital yuan began in 2019, accumulating an initial phase of at least nine years of research and testing. During this period, the government has progressively strengthened support infrastructure, including the establishment of an industrial park dedicated to the Luohu district in Shenzhen, launched to coordinate the development of hardware wallets, payment solutions, and smart contracts related to the currency.

The main challenge remains large-scale adoption: research conducted by the Digital Currency Research Institute of the People’s Bank of China has highlighted how wallet solution providers are crucial for enabling CBDC payment options across various retail sectors. Government initiatives aim to bridge this gap through a multitude of technological and infrastructural tools.

Overall, the new plan reveals an acceleration toward operational realization: the January 1, 2026 deadline transforms the Chinese digital currency from an experiment into a structured payment system, positioning China among the countries with the most advanced and practically implemented CBDCs globally.