TLDR
- China’s central bank will permit interest payments on digital yuan from January 2026.
- Digital yuan will transition to “digital deposit currency” with interest incentives.
- Interest payments are designed to help China overcome digital yuan adoption challenges.
- Digital yuan transactions reached 3.48 billion, worth $2.38 trillion by November 2025.
China’s central bank has announced a major policy change aimed at promoting the adoption of its digital currency, the digital yuan (e-CNY). Starting on January 1, 2026, commercial banks will be allowed to pay interest on digital yuan deposits, which marks a significant shift in how the currency will be handled. This move is part of a broader strategy to transition the e-CNY from being just a digital form of cash to a fully functional “digital deposit currency.”
JUST IN: 🇨🇳 China to let banks pay interest on digital yuan (CBDC) to boost adoption in 2026 pic.twitter.com/lWJR1k9ne3
— Crypto India (@CryptooIndia) December 29, 2025
The People’s Bank of China (PBOC) has been exploring and testing the digital yuan through various pilot programs since 2019. Although the digital yuan has become one of the most advanced central bank digital currencies (CBDCs) in the world, adoption rates have not met expectations. The new policy seeks to address this challenge by making the digital yuan more appealing to consumers and businesses alike.
Transition to Digital Deposit Currency
Under the new framework, the digital yuan will be treated as a deposit currency rather than simply as digital cash. This means that it will function similarly to traditional bank deposits, but with the added feature of earning interest. According to Lu Lei, a deputy governor of the PBOC, the change will help banks manage digital yuan balances more effectively while also offering customers a return on their holdings.
Lu explained that this shift would allow banks to offer competitive interest rates on digital yuan deposits, aligning with self-regulatory agreements already in place for traditional deposit products. This is expected to incentivize both consumers and businesses to adopt the digital yuan more widely, as it becomes more attractive compared to traditional bank deposits or even mobile payment platforms like WeChat Pay and Alipay, which dominate the cashless transaction market in China.
Boosting Adoption Amid Competition
The digital yuan has faced considerable competition from established mobile payment platforms that have long been integrated into Chinese society. Despite the PBOC’s efforts to promote the e-CNY, adoption has been slower than anticipated. In response, the central bank is exploring new ways to increase the currency’s use. Allowing interest payments is seen as one of the most effective ways to make the digital yuan more appealing to the public.
The new policy will also offer greater protections to digital yuan holders. Lu Lei emphasized that balances in digital yuan wallets will be treated with the same level of security as traditional bank deposits, meaning they will be covered under China’s deposit insurance system. This move is designed to enhance trust and reduce concerns among users who might be hesitant to fully transition to digital yuan due to security or reliability issues.
Future Plans for the Digital Yuan
Alongside this policy change, the PBOC is working to expand the use of the digital yuan beyond China’s borders. The central bank has already launched a pilot program to facilitate cross-border payments with countries like Singapore and is planning to include additional markets such as Thailand, Hong Kong, and the UAE. These international efforts aim to increase the digital yuan’s global influence and encourage other nations to consider CBDCs.
By the end of November 2025, China had processed over 3.48 billion transactions using the digital yuan, with a total value of 16.7 trillion yuan ($2.38 trillion). This highlights the growing usage of the e-CNY, even as China continues to experiment with its functionality. The PBOC remains focused on enhancing the currency’s role in both domestic and international transactions to ensure that China remains at the forefront of CBDC development.
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