China will allow commercial banks to pay interest on digital yuan wallets starting January 1, 2026, transforming the world's most advanced central bank digital currency into a deposit-like instrument.
The policy shift comes as the U.S. moves in the opposite direction, having banned CBDCs entirely this year.
Lu Lei, deputy governor of the People's Bank of China, announced the change in state newspaper Financial News on Monday.
The digital yuan will transition from "digital cash" to "digital deposit currency," Lei wrote.
What Happened
Commercial banks will pay interest on verified e-CNY wallets according to existing deposit pricing agreements.
Digital yuan balances will receive full protection under China's deposit insurance system.
Banks gain greater flexibility to manage digital yuan as part of their asset-liability operations.
By November 2025, China had processed 3.48 billion digital yuan transactions worth 16.7 trillion yuan ($2.38 trillion).
The framework follows a decade of pilot programs that began in 2019.
China is simultaneously expanding cross-border digital yuan initiatives.
Planned pilots include Singapore, Thailand, Hong Kong, the United Arab Emirates and Saudi Arabia.
The PBOC opened its e-CNY International Operation Center in Shanghai in September to support global yuan influence.
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Why It Matters
Interest payments aim to boost adoption of the digital yuan, which has struggled against dominant mobile payment platforms WeChat Pay and Alipay.
The move sharply contrasts with U.S. policy.
President Donald Trump signed an executive order on January 23 banning the establishment, issuance or use of CBDCs, citing threats to financial stability, privacy and sovereignty.
Blockchain adviser Anndy Lian described the ban as a "game-changer" for the U.S. cryptocurrency industry.
In July, Trump signed the GENIUS Act, establishing America's first comprehensive federal framework for dollar-backed stablecoins with mandatory Anti-Money Laundering compliance.
Critics warn the digital yuan could increase government financial control.
"The Chinese government wants more control over payments," Alex Gladstein, chief strategy officer at the Human Rights Foundation, told MIT Technology Review.
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