From ‘digital cash’ to interest-bearing deposits
China’s central bank will turn the digital yuan into an interest-bearing instrument from January 1, 2026. The People’s Bank of China (PBoC) set out the shift in an official action plan and Xinhua summary on the State Council website, which classifies e-CNY held in commercial bank wallets as bank deposit liabilities and orders banks to pay interest on those balances in line with deposit rate rules.[source]
Under the same framework, those wallet balances fall under China’s deposit insurance system and enter the reserve requirement base. Non-bank payment institutions must hold 100% reserves for the digital yuan they manage, matching existing rules on customer reserve funds.[source]
By the end of November 2025, the pilots had processed 3.48 billion digital yuan transactions worth 16.7 trillion yuan (about 2.37 trillion dollars), according to the State Council note.[source] Volumes now sit at real scale even before interest payments switch on.
From M0 cash to M1 money
PBoC vice governor Lu Lei described the redesign as a move from “digital cash” to “digital deposit money” in a bylined article for the central bank’s Financial News, echoed across official media.[source] China Daily highlighted that the new regime gives the digital yuan commercial bank liability status and extends its monetary classification from M0-style cash into M1, which combines cash with demand deposits.[source]
“The digital renminbi will move from the digital cash era to the digital deposit currency era,” Lu wrote.
Shanghai New Finance Research Institute vice dean Liu Xiaochun told China Daily that this structure makes China the first major economy to position a live central bank digital currency as interest-bearing deposit money, rather than a pure cash replacement.[source] Current live CBDCs such as the Bahamas’ Sand Dollar and Nigeria’s eNaira do not pay interest, while the EU’s draft digital euro law explicitly keeps the digital euro non-remunerated.[source]
How the interest on e-CNY wallets works
A detailed breakdown from Securities Times, carried by Sina Finance, shows how the policy will hit user wallets. From January 1, 2026, real-name level 1, 2 and 3 digital yuan wallets at participating banks will earn interest at each bank’s posted demand-deposit rate. Users do not need to take any extra action. Interest will accrue automatically while payment flows and user experience stay the same.[source]
The same report notes that only anonymous level 4 wallets, which users open with a mobile number and minimal KYC, stay non-interest-bearing. That preserves a low-friction option for small, privacy-sensitive payments while steering larger balances into fully identified accounts.
Ten institutions currently operate the e-CNY, including Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications, Postal Savings Bank, China Merchants Bank, Industrial Bank, Tencent-backed WeBank and Ant Group’s MyBank.[source] These last two sit behind WeChat Pay and Alipay, which means interest-bearing e-CNY can sit directly inside the dominant super-app rails once banks push the feature.
Digital yuan wallet balances at banks will count toward required reserves at the PBoC. Non-bank payment institutions must hold full digital yuan reserves at partner banks, which regulators frame as a way to keep “financial disintermediation” and deposit flight risks inside the supervised banking stack.[source]
Sina’s coverage also stresses that banks will calculate interest on e-CNY using the same self-regulatory framework that already governs deposit pricing, and cites industry views that the overall impact on bank balance-sheet capacity stays modest.[source] Large state lenders’ demand-deposit rates sit near 0.05%, according to Bloomberg figures relayed by Singapore’s Lianhe Zaobao, so the immediate income boost for retail users is tiny.[source]
Alipay and WeChat Pay in the crosshairs
For years, the e-CNY struggled against entrenched mobile payment giants. Research tracking the pilots found that Chinese users already relied on Alipay and WeChat Pay for almost all daily spending, leaving little room for a new state wallet even as the PBoC rolled out zero-fee QR payments and offline modes.[source] More recent payment data for 2025 still shows private mobile platforms handling over 90% of mobile transactions.[source]
The new framework attacks that problem on several fronts. First, it makes e-CNY balances functionally equivalent to bank deposits in safety and remuneration. Second, it gives banks a clear incentive to promote digital yuan wallets, since those balances now sit on their books, count toward reserves and earn a spread like any other deposit. Third, by keeping anonymous wallets non-interest-bearing, it nudges larger, sticky balances into fully KYC’d accounts where regulators see the flows in detail.
Brookings analysts have long framed the digital yuan push as part of a wider “government over technology” swing in Chinese payments, where Beijing reins in private platforms and pulls transaction data back toward the state and state banks.[source] Turning e-CNY into insured, interest-bearing bank money tightens that grip while leaving Alipay and WeChat Pay as front-end interfaces rather than ultimate custodians of value.
Cross-border rails and the CBDC race
The interest switch lands on top of a growing cross-border stack. China opened a digital yuan international operation center in Shanghai in September 2025 to run cross-border payment, blockchain and digital asset platforms for the e-CNY.[source] The PBoC has also leaned on the mBridge multi-CBDC project, where e-CNY already accounts for more than 95% of transaction value in current pilots, with 4,047 cross-border payments totaling 387.2 billion yuan processed by November 2025.[source]
For trade partners that already tap China’s Cross-Border Interbank Payment System or join mBridge, e-CNY that pays interest and sits inside deposit insurance looks more like standard bank money than an experimental token. That matters for treasurers and payment firms deciding which rails to build into cross-border workflows.
China leans in as the US and EU pull back on CBDC design
Globally, the move highlights a sharp policy split. In the United States, President Donald Trump’s January 23, 2025 executive order on digital financial technology explicitly prohibits federal agencies from establishing or promoting a central bank digital currency, halting prior CBDC research inside the Fed and Treasury.[source] Europe, meanwhile, is building a digital euro that legislators and the ECB say will not bear interest and will face tight holding limits to protect bank funding.[source]
China is taking the opposite path. It is turning its CBDC into interest-bearing M1 money that plugs straight into bank balance sheets and cross-border infrastructure. For crypto markets, that confirms two trends. First, mainland China continues to ban open crypto trading while investing heavily in state digital rails. Second, CBDC design is fragmenting. One camp keeps digital cash non-interest-bearing and constrained. Beijing is testing what it means when central bank digital money behaves like deposits and sits at the heart of monetary transmission instead.
