TLDR
- Banks in China will pay interest on digital yuan holdings starting January 1, 2026.
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The digital yuan will transition from cash to a deposit currency under the new policy.
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China processed 3.48 billion digital yuan transactions worth $2.38 trillion as of November 2025.
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The new framework aims to make digital yuan more appealing to users and increase its adoption.
China’s central bank has announced that, starting January 1, 2026, commercial banks will be allowed to pay interest on digital yuan holdings. This decision marks a significant shift in the digital yuan’s role, transitioning from a digital cash form to a “digital deposit currency.” The move is part of the People’s Bank of China’s broader strategy to incentivize citizens and businesses to adopt the country’s Central Bank Digital Currency (CBDC).
According to a statement from Lu Lei, Deputy Governor of the People’s Bank of China, the transition of the digital yuan to a deposit currency is designed to make it a more integrated and competitive financial tool within the banking system. The central bank aims to offer users the same security and benefits associated with traditional bank deposits, ensuring that the digital yuan becomes an attractive alternative to other forms of currency.
China Policy Changes to Strengthen Digital Yuan Adoption
The new framework comes after nearly a decade of pilot programs and experimental phases for the e-CNY (digital yuan). While the currency was launched officially in 2022, its adoption has been slower than expected. The central bank hopes the ability to earn interest on digital yuan holdings will encourage more widespread use among both individuals and businesses.
Under the new system, digital yuan balances will be treated similarly to traditional bank deposits and will be covered by China’s deposit insurance system, ensuring that users’ holdings are protected.
As part of this overhaul, banks will have the flexibility to manage digital yuan balances as part of their regular operations. This means that banks can now treat digital yuan holdings just like any other deposit, providing interest rates based on existing self-regulatory agreements. The central bank has also clarified that non-bank payment institutions, which play a role in China’s payment systems, will need to comply with a 100% reserve ratio for their digital yuan reserves. These measures aim to streamline operations and integrate digital yuan more seamlessly into the broader financial system.
Expanding the Digital Yuan’s Global Reach
While the policy changes are designed to boost domestic adoption, China is also taking steps to enhance the global presence of its digital yuan. The PBOC has announced plans to establish an international operations center for the digital yuan in Shanghai. This initiative is part of China’s strategy to expand the cross-border use of its CBDC, with plans for pilot projects in countries like Singapore, Thailand, Hong Kong, the UAE, and Saudi Arabia.
These moves are designed to increase the influence of the digital yuan on global markets and encourage international use of China’s digital currency.
Additionally, the PBOC’s recent commitment to expanding the digital yuan’s cross-border functionality could open up new opportunities for the e-CNY to compete with established global payment networks. As countries around the world explore the use of digital currencies, China is positioning the digital yuan as a key player in the emerging digital economy.
Digital Yuan Growth and Future Prospects
The digital yuan has shown impressive growth in recent years, with over 3.48 billion transactions processed by the end of November 2025, totaling a cumulative value of 16.7 trillion yuan (approximately $2.38 trillion).
However, despite this growth, the digital yuan still faces strong competition from widely used mobile payment platforms like WeChat Pay and Alipay, which dominate China’s cashless transaction market. The new policy offering interest on digital yuan balances as a result is expected to address some of the challenges the currency faces in gaining widespread adoption.
