China will allow banks to pay interest on holdings of its digital yuan (e-CNY) beginning January 1, 2026, marking a major shift in the central bank digital currency’s design as authorities seek to accelerate nationwide adoption.
According to Bloomberg, the move will transition the digital yuan toward a deposit-like model, placing it closer to traditional bank money rather than a non-interest-bearing cash equivalent.
The policy change was announced by the People’s Bank of China (PBoC), which said it will roll out a new supervisory framework for the digital yuan starting in 2026. Under the updated structure, commercial banks operating official e-CNY wallets will be permitted to pay interest on balances held by users, with rates expected to vary depending on the size of the holdings.
From Pilot to Broader Deployment
China’s digital yuan has been in large-scale testing and has onboarded millions of users across retail payments, public services, and enterprise use cases. While the project remains formally classified as a pilot, officials familiar with the matter say the e-CNY is now entering a phase of broader domestic use, with limited international applications also under evaluation.
Authorities view interest payments as a key incentive to encourage consumers to hold digital yuan balances rather than immediately converting them into bank deposits or spending them through existing payment platforms. Despite its progress, adoption has lagged behind dominant private payment systems such as WeChat Pay and Alipay, which continue to dominate daily transactions across China.
Long-Term Strategy and Global Context
China’s work on the digital yuan dates back nearly a decade. In 2016, the country introduced a two-tier operational model in which the central bank issues the currency while commercial banks distribute it to users. After years of real-world testing, this framework has gained recognition among central banks and international institutions as a reference model for CBDC implementation.
However, China’s ambitions for cross-border use have faced setbacks. A previous attempt to expand the digital yuan into international settlement frameworks stalled after the Bank for International Settlements scaled back cooperation amid concerns over sanctions compliance and potential geopolitical implications.
With interest payments set to begin in 2026, the digital yuan will effectively be treated as equivalent to traditional sovereign money while offering financial incentives designed to strengthen its role within China’s monetary system.