China's Digital Yuan undergoes a major upgrade: holding e-CNY can also earn interest, and application scenarios may accelerate expansion

China’s digital yuan (e-CNY) is about to undergo a key institutional upgrade. The People’s Bank of China (PBOC) announced that starting January 1, 2026, a new digital yuan operational framework will be launched, allowing commercial banks to pay interest to digital yuan holders to enhance the attractiveness and usage frequency of central bank digital currency (CBDC). This change is seen as an important step in the transformation of digital yuan from “digital cash” to a “digital deposit tool.”

Lü Lei, Vice Governor of the PBOC, pointed out in an article in the Financial Times that this “action plan” will promote the functional upgrade of digital yuan within the financial system. Future digital yuan will no longer serve solely as a cash substitute but will have certain deposit attributes, be issued and circulated within the banking system, and be supported by the central bank with unified technical support and regulatory framework.

Lü Lei stated that the new phase of digital yuan will operate based on an account system, compatible with distributed ledger technology, and will feature functions such as currency valuation, value storage, and cross-border payments. At the same time, it will be reflected as a liability of commercial banks at the legal and accounting levels. This means that, functionally, digital yuan will be closer to demand deposits, potentially increasing residents’ and enterprises’ willingness to hold e-CNY long-term.

In terms of supporting infrastructure, the PBOC also proposed establishing an international digital yuan operation center in Shanghai to explore cross-border payments and international application scenarios. This move has been interpreted by external observers as another forward-looking attempt by China to internationalize its CBDC.

Looking back at its development history, the PBOC launched the Digital Currency Electronic Payment (DCEP) research project as early as 2014, making it one of the earliest central banks to systematically study CBDC. In April 2022, digital yuan officially entered the public eye and has been promoted through consumption subsidies, airdrops, and pilot programs in multiple cities.

As policies such as the “digital yuan interest mechanism,” “e-CNY deposit attributes,” and “latest progress in China’s CBDC” are gradually implemented, the financial attributes of digital yuan continue to strengthen. Industry experts generally believe that this new framework will not only help expand the practical application scale of digital yuan but may also have a profound impact on future payment systems, bank liability structures, and cross-border settlement models.