China’s PBOC Issues ‘Action Plan’ to Transform Digital Yuan into Interest-Bearing Deposit Money

Key Points:

• Starting January 1, 2026, the People’s Bank of China will transition the digital yuan from digital cash to “digital deposit money,” allowing users to earn interest on their holdings.
• A new international operations center will be established in Shanghai to spearhead cross-border payments and integrate the currency into the global financial system.
• The framework aims to incentivize users and commercial banks, moving beyond simple airdrops to create a sustainable, interest-bearing ecosystem that competes with traditional bank deposits.

The People’s Bank of China (PBOC) has announced a landmark shift in the digital yuan framework. Interestingly, this signals a fundamental transformation of the world’s most advanced sovereign electronic currency.

Starting January 1, 2026, the PBOC will implement a new “action plan” that permits commercial banks to pay interest on digital yuan balances, formal document titled “Action Plan on Further Strengthening the Construction of Digital RMB Management Service System and Related Financial Infrastructure.”

The policy effectively reclassifies the e-CNY from its original status as a digital replacement for physical cash to a functional form of digital deposit money.

The structural change is designed to deepen the integration of the currency into the daily lives of citizens and the operations of financial institutions. 

The central bank is providing a clear financial incentive for both individuals and corporations to hold and use the digital currency over traditional alternatives by allowing interest payments.

A Decade of Evolution

The journey toward this moment began in 2014, when the PBOC first initiated the Digital Currency Electronic Payment (DCEP) project. After years of closed-door research, the central bank officially launched the digital yuan pilot in April 2022.

Since that launch, authorities have utilized various methods to spur adoption, including high-profile “airdrops” where millions of e-CNY were distributed to citizens via digital lotteries. However, the new 2026 framework represents a shift from temporary incentives to a permanent structural advantage.

Lu Lei, a deputy governor of the People’s Bank of China, detailed the vision for this next phase in a recent editorial. He described the future of the currency as a modern digital payment means that possesses the attributes of commercial bank liabilities.

According to Lu, the system will remain under the strict technical support and supervision of the central bank while remaining compatible with distributed ledger technology (DLT).

“The future digital yuan will be a modern digital payment and circulation means issued and circulated within the financial system, with technical support and supervision provided by the central bank, possessing the attributes of commercial bank liabilities, based on accounts, compatible with distributed ledger technology, and having the functions of a measure of monetary value, store of value, and cross-border payment,” Lei said.

Shanghai at the Centre of Global Ambition

The action plan does not merely focus on domestic retail use. It also proposes the establishment of an international digital yuan operations center in Shanghai. This center is expected to serve as the primary hub for managing the currency’s role in international trade and cross-border settlements.

By positioning Shanghai as a global gateway for the e-CNY, China is signaling its intent to challenge the traditional dominance of existing international payment rails. The new framework specifically highlights that the currency will function as a measure of monetary value, a store of value, and a tool for cross-border transactions.

Reported by The Block, data suggests that as of late 2025, the e-CNY has already processed approximately 3.48 billion transactions, reaching a cumulative value of 16.7 trillion yuan ($2.38 trillion). The upcoming transition to an interest-bearing model is expected to accelerate these figures significantly as the currency begins to compete directly with private payment giants like Alipay and WeChat Pay.

Technical and Regulatory Foundations

The shift to “digital deposit money” means that digital yuan holdings will now be treated similarly to traditional bank accounts. This includes protection under China’s deposit insurance system, a move that increases consumer confidence and security.

China Daily noted that the new “Digital RMB 2.0” era will blend account-based systems with smart contract functionality. This allows for automated payments and more complex financial products to be built directly on top of the e-CNY infrastructure.

For commercial banks, the new rules offer greater flexibility in managing their assets and liabilities. Banks will be able to treat e-CNY balances as part of their broader deposit base, while non-bank payment institutions will still be required to maintain a 100% reserve ratio with the central bank to ensure systemic stability.