Beijing is preparing a new phase for the digital yuan, turning it into an interest-bearing deposit instrument under a redesigned central bank framework.
Summary
PBOC launches new framework on Jan. 1
The People’s Bank of China (PBOC) will implement a fresh framework for the e-CNY on Jan. 1, allowing commercial banks to pay interest on users’ holdings. The move aims to boost usage of the central bank digital currency within China’s financial system.
Under the action plan, the e-CNY will shift from its current role as digital cash toward fully fledged digital deposit money. Moreover, officials expect this transition to integrate the token more tightly with traditional banking services and modern payment rails.
From digital cash to deposit money
The new policy was detailed by Lu Lei, a deputy governor of the PBOC, in an article published by state newspaper Financial News. He described the future e-CNY as a modern digital payment and circulation tool issued and managed entirely within the financial system.
According to Lu, the currency will carry the attributes of commercial bank liabilities, be account-based, and remain under the technical and regulatory oversight of the central bank. However, it will also be compatible with distributed ledger technology, enabling more flexible settlement architectures.
Lu added that the revamped system will give the currency clear functions as a measure of monetary value, a store of value, and a vehicle for cross-border payment. That said, the PBOC has not disclosed specific rates or conditions for interest on e-CNY balances.
Shanghai to host international operations center
The action plan also includes a proposal to establish an international digital yuan operations centre in Shanghai. The platform is designed to support cross-border usage and enhance the currency’s reach in global trade and financial flows.
Moreover, an international hub in Shanghai would align with China’s broader efforts to promote the yuan in overseas markets. It could eventually serve financial institutions that want to experiment with cross border digital yuan settlement and payment corridors.
Decade-long development of China’s CBDC
The PBOC began work on the project in 2014 under the name Digital Currency Electronic Payment (DCEP). At that stage, the initiative focused on researching the potential benefits and risks of a central bank digital currency, long before most major economies advanced their own designs.
The central bank officially launched the e-CNY in April 2022 and has since run multiple pilot schemes across Chinese cities. These trials have included targeted digital currency airdrop pilots, where local governments and banks distributed small amounts of e-CNY to residents to test retail payments and wallet functionality.
As the pilots expanded, authorities tested the digital yuan system in scenarios such as transportation, e-commerce, and public services. However, the latest framework marks the first time the digital yuan will be positioned explicitly as interest-bearing deposit money within China’s banking architecture.
Implications for China’s digital finance strategy
By allowing digital yuan interest payments, policymakers hope to narrow the gap between the e-CNY and conventional bank deposits. This could encourage households and businesses to hold larger balances and integrate the token more deeply into day-to-day treasury and payment operations.
Furthermore, linking the e-CNY to commercial bank liabilities may help the PBOC fine-tune monetary transmission and oversight. The framework keeps the central bank at the core of issuance and supervision, while using existing institutions to handle customer-facing services and product design.
That said, questions remain about how the shift will affect traditional deposits, as well as how banks will price interest on e-CNY compared with other savings instruments. Market observers will closely watch the rollout after Jan. 1 for signs of how quickly adoption accelerates.
In summary, China’s new framework signals a decisive evolution of the e-CNY from experimental digital cash to regulated, interest-bearing deposit money, with Shanghai positioned as a future hub for international operations and cross-border use.
