China Mandates Interest Payments on Digital Yuan Holdings by 2026

The People’s Bank of China (PBOC) has announced a significant update in the development of its Digital Yuan, or e-CNY, as part of enhancing the country's Central Bank Digital Currency (CBDC).

Key Developments

Commercial banks are now required to pay interest on digital yuan holdings, aligning with deposit pricing agreements.
The transition from digital cash to "digital deposit currency" is set to start on January 1, 2026.
The digital yuan will receive protection comparable to traditional deposits under China's deposit insurance system.
PBOC employs a two-tiered model: it sets rules and technical standards, while commercial banks manage end-users.
This overhaul follows a decade of pilot programs and experimentation.

Investment in Digital Yuan

The official pilot began in 2019 with various measures introduced to support its rollout.
Adoption challenges remain; wallet providers play a crucial role in enabling CBDC payment options in retail settings.
An industrial park for digital yuan development has been launched in Shenzhen, focusing on payment solutions, smart contracts, and promotion.

These developments highlight China's ongoing commitment to advancing its digital currency infrastructure and promoting the digital yuan's adoption.