Digital yuan to earn interest as China updates currency rules

The People’s Bank of China approved a policy that permits banks to offer interest on holdings of the digital yuan (e-CNY), a central bank digital currency used for domestic payments and cross-border settlement, in an effort to make the digital currency more attractive as a store of value and an active medium of transaction.

Under the updated regime, commercial banks will be able to pay interest on digital yuan deposits held by customers, a change from the current structure where the central bank has not allowed such incentives. The new framework is slated to take effect at the start of 2026, reflecting policymakers’ intention to deepen the role of the digital yuan in China’s financial system.

The move follows ongoing efforts by Chinese authorities to refine and expand the use of their central bank digital currency, which has been in pilot phases for several years and is used in domestic and growing cross-border contexts. The People’s Bank of China has previously rolled out pilot programs in major cities and scaled up infrastructure to support everyday payments in digital yuan.

Analysts describe the interest-paying mechanism as part of broader steps to enhance the digital yuan’s appeal to retail and institutional users, encouraging holders to maintain balances rather than move funds away to alternative assets or payment systems. By aligning the digital yuan with interest-bearing instruments, authorities are attempting to strengthen the CBDC’s competitive position within China’s financial ecosystem, where mobile payments and private-sector platforms have long dominated.

People’s Bank of China officials have also been advancing digital yuan operations internationally, establishing infrastructure such as a digital yuan operations centre in Shanghai that supports both domestic use and cross-border applications.

The digital yuan – officially known as e-CNY – is a central bank digital currency issued by the People’s Bank of China and intended to function alongside physical renminbi. It has been tested since the early 2020s in cities including Shenzhen and Chengdu and integrated into everyday payments, public services and some international transaction experiments.