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China is implementing a significant policy change to boost the use of the digital yuan (e-CNY). The People’s Bank of China (PBOC) announced that commercial banks will soon begin paying interest on digital yuan balances.
Speaking in an article published in the state-owned Financial News, PBOC Vice Governor Lu Lei announced that the new framework will come into effect on January 1, 2026.
According to Lu, while e-CNY has functioned as “digital cash” until now, the new system will position it as “digital deposit money.” This transformation is seen as the most comprehensive step taken after nearly a decade of pilot studies.
Under the new regulations, balances held in verified digital yuan wallets will earn interest in line with existing deposit interest agreements. Furthermore, the digital yuan will be protected under China’s deposit insurance system at the same level as traditional deposits.
Banks will also be given more flexibility in using digital yuan balances in balance sheet and liquidity management. For non-bank payment institutions, e-CNY reserves will be subject to the same rules as existing customer funds, with a 100% reserve requirement.
By the end of November 2025, a total of 3.48 billion digital yuan transactions had been conducted in China, reaching a transaction volume of 16.7 trillion yuan (approximately $2.38 trillion). However, e-CNY is struggling to compete with widely used mobile payment platforms such as WeChat Pay and Alipay.
Recently, China has been aiming to increase the cross-border use of the digital yuan. Pilot projects with Singapore and collaborations with Hong Kong, Thailand, and the UAE are on the agenda. On the other hand, while China supports blockchain technology, it continues to ban cryptocurrency trading and mining in the country.
*This is not investment advice.
coinfomania.com