China’s Digital Yuan Enters a New Phase With Interest-Bearing Wallets
China is preparing a major upgrade to its digital yuan, a move that could redefine how CBDCs function in the real economy. Starting Jan. 1, 2026, commercial banks will be permitted to pay interest on e-CNY wallet balances, officially pushing the digital yuan beyond its original role as a digital version of cash.
According to Lu Lei, deputy governor of the People’s Bank of China (PBOC), the new framework allows banks to integrate the digital yuan directly into their asset-liability management systems. Writing in a PBOC-affiliated publication, Lei described the shift as a foundational change in how the e-CNY operates within China’s financial system.
“The digital RMB will move from the digital cash era to the digital deposit currency era,” Lei said, emphasizing that the digital yuan will now support value storage, pricing functions, and cross-border payments.
Digital Yuan Evolves From Cash Substitute to Digital Deposit Currency
Why Interest Changes Everything for e-CNY
Until now, the digital yuan largely mirrored physical cash — usable for payments, but not designed to generate returns. By enabling interest payments, China is effectively turning the e-CNY into a deposit-like instrument, blurring the line between traditional bank money and central bank digital currency.
This evolution strengthens the digital yuan’s appeal for consumers and businesses, while giving banks a clearer incentive to integrate e-CNY balances into everyday financial products.
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China Doubles Down on CBDCs as Crypto Remains Banned
While cryptocurrency trading and stablecoins remain banned in mainland China, the PBOC continues to accelerate development of its state-issued digital currency. Officials view the digital yuan as a way to harness blockchain-style efficiency without surrendering monetary control.
This approach sharply contrasts with the United States, where policy is moving in the opposite direction.
US Rejects CBDCs as China Pushes Forward
Two Superpowers, Two Digital Currency Visions
Under President Donald Trump, the US formally banned the creation and use of a central bank digital currency. An executive order signed on Jan. 23 prohibits the issuance or circulation of a US CBDC, citing concerns over financial stability, privacy, and national sovereignty.
Industry observers called the move a turning point. Blockchain adviser Anndy Lian previously described the decision as a “game-changer” that could accelerate the growth of private stablecoins in the US.
Reinforcing that stance, Trump later signed the GENIUS Act, America’s first comprehensive stablecoin framework, setting clear rules for collateralization and requiring full compliance with Anti-Money Laundering (AML) laws.
China, meanwhile, is charting its own path — one centered firmly on state control through the digital yuan.
China’s Action Plan to Accelerate Digital Yuan Adoption
Building the Infrastructure for e-CNY at Scale
The interest-bearing upgrade is part of a broader strategy titled the “Action Plan on Further Strengthening the Digital RMB Management Service System and Related Financial Infrastructure Construction.”
The plan aims to expand nationwide usage of the digital yuan while strengthening the technical backbone required for large-scale adoption.
In September, the PBOC launched the RMB International Operations Center in Shanghai — a blockchain-powered platform designed to support onchain settlement and cross-chain transfers. The initiative is intended to promote the digital yuan’s role in cross-border trade and international payments.
Digital Yuan Sparks Debate Over Control and Surveillance
While Chinese authorities argue that the digital yuan can improve efficiency and financial inclusion, critics warn of deeper implications.
Alex Gladstein, chief strategy officer at the Human Rights Foundation, has long argued that state-issued digital currencies could expand government control over payments. He notes that while Beijing already exerts significant influence over major payment platforms, a fully traceable digital currency would provide even greater visibility — and potentially the power to restrict access to money.
In comments to MIT Technology Review, Gladstein warned that direct oversight of a digital currency gives governments more data and “more power to deny people access” to financial services.
Why the Digital Yuan Shift Matters Globally
By turning the digital yuan into an interest-bearing instrument, China is pushing CBDCs into uncharted territory. The move signals that Beijing sees digital currency not just as a payments tool, but as a core pillar of future monetary policy.
As global powers diverge on digital money — with China embracing CBDCs and the US rejecting them — the evolution of the e-CNY could shape how nations think about money, control, and financial sovereignty in the digital age.
