China will make the digital yuan (e-CNY) interest-bearing under a new People’s Bank of China (PBOC) action plan effective 2026-01-01, shifting the token’s role from cash-like to deposit-like and tying balances to commercial-bank operations.
The PBOC’s action plan reclassifies e-CNY holdings as liabilities managed by commercial banks under an account-based model that leverages distributed ledger technology. Distributed ledger technology is a replicated digital record system that records transactions across multiple nodes to improve resilience and auditability.
Wallets with verified identity and bank linkage will accrue interest set and administered by commercial banks in line with existing deposit-rate regimes, with early indications pointing to possible starting yields near 0.05%.
The policy integrates digital-yuan balances into banks’ asset-liability operations and subjects them to deposit-insurance coverage, shifting the e-CNY’s monetary classification toward demand-deposit (M1) and broader money-supply (M2) metrics.
Domestically, making the e-CNY interest-bearing is a targeted incentive to narrow the convenience-and-liquidity advantage held by mobile-payment giants that do not pay yields on stored balances. For product teams and compliance officers, the change creates immediate operational priorities: update custody and reconciliation processes, modify AML/KYC flows for account-linked wallets, and reflect e-CNY positions in NAV and AUM reporting where relevant.
From a monetary-policy perspective, the instrument becomes a more direct transmission channel, allowing authorities to influence liquidity and short-term rates through a centrally backed digital deposit.
Strategic and market implications for digital Yuan
Internationally, the redesign strengthens efforts to internationalize the yuan by improving the currency’s attractiveness for cross-border transactions and reserve use; the plan references support infrastructure and multilateral CBDC collaborations intended to reduce reliance on incumbent dollar-denominated rails.
Regulatory consequences will include clearer supervisory jurisdiction over commercial banks’ digital-yuan holdings and potential revisions to liquidity-coverage and reserve requirements, alongside renewed scrutiny of private stablecoins and onshore-to-offshore conversions.
Market participants should expect near-term volatility in deposit flows as users re-evaluate allocation between digital wallets and traditional bank deposits, and banks to announce operational and pricing responses in the implementation window.
The PBOC specifies that the e-CNY will function as a measure of monetary value and a medium for payments while remaining technically distinct from privately issued tokens; commercial banks will be responsible for interest accounting and customer-facing services. The supervisory framework anticipates integration with existing KYC/AML regimes and positions the central bank to monitor aggregate flows for macroprudential purposes.
The redesign of the e-CNY into an interest-bearing digital deposit recalibrates its role in China’s monetary architecture and sets new operational, compliance, and market priorities for banks and fintechs.
