From Digital Cash To Digital Deposits

China is preparing to introduce interest within its commercial banks, allowing investors to earn interest for their digital yuan (e-CNY) starting Jan 1, 2026. This marks a decisive shift for E-CNY, as it is no longer just a digital substitute for cash but a deposit-like monetary instrument embedded in the formal banking system.

Lu Lei, the deputy governor of the People's Bank of China (PBOC) made the announcement of the policy through an article published by the China Financial Times, saying

"The digital RMB will move from the digital cash era to the digital deposit currency (Digital Deposit Money) era. It has the functions of monetary value scale, value storage, and cross-border payment."

In practical terms, this means commercial banks will be permitted to offer interest-bearing E-CNY wallets, making the digital yuan function more like a traditional bank deposit than a cash equivalent. By allowing balances to accrue interest, the PBOC is giving users a financial incentive to hold E-CNY, potentially accelerating adoption among households and businesses.

Lu noted that the redesigned framework gives the digital yuan three core monetary functions: unit of account, store of value, and payment medium, while also enabling cross-border settlement capabilities. This evolution could make E-CNY a more attractive tool for retail payments, interbank transfers, and international trade — particularly as China seeks to modernize its financial plumbing and reduce friction in payment flows.

Faster Payments, Deeper Integration — But Tighter Oversight

The interest-bearing E-CNY framework is part of a broader initiative titled the “Action Plan on Further Strengthening the Digital RMB Management Service System and Related Financial Infrastructure Construction.” The plan aims to expand nationwide E-CNY usage while building the technical infrastructure needed to support large-scale adoption.

As part of this effort, the PBOC established the RMB International Operations Center in Shanghai, a blockchain-based platform designed to facilitate onchain settlement tools and cross-chain transfer mechanisms. Officials say these developments could improve payment efficiency, lower transaction costs, and support the internationalization of the yuan — especially in cross-border trade settlements.

However, critics argue that these benefits come with significant trade-offs. Unlike cash or decentralized payment systems, the E-CNY is fully centralized and programmable, giving authorities granular visibility into transaction flows.

Alex Gladstein, chief strategy officer at the Human Rights Foundation, has warned that a widely adopted digital yuan could dramatically expand the state’s ability to monitor payments, collect financial data, and potentially restrict access to money.

While the PBOC already exercises oversight over China’s dominant payment platforms, including Alipay and WeChat Pay, a state-issued digital currency would provide direct, real-time control over the monetary layer itself — raising concerns about financial privacy, censorship, and the potential for selective enforcement.

A Widening Global Divide Over Digital Money

China’s move stands in stark contrast to developments in the United States, where President Donald Trump signed an executive order banning the creation and use of a US central bank digital currency, citing risks to financial stability, individual privacy, and national sovereignty.

Instead, Washington has opted to support privately issued stablecoins, formalized through the GENIUS Act, which establishes regulatory standards for collateralization and anti-money-laundering compliance.

This divergence highlights a growing global split in monetary philosophy. China is doubling down on state-led digital money, embedding the E-CNY deeper into its banking and payment systems, while the US is relying on market-driven alternatives anchored in the private sector.

By allowing interest payments on digital yuan wallets, Beijing may significantly boost E-CNY adoption, transforming it into a competitive alternative to traditional bank deposits. At the same time, the policy reinforces the central bank’s role at the core of everyday financial activity — a feature supporters see as stability-enhancing, and critics view as a step toward expanded state control.

Here at Coinlive, we believe the introduction of interest-bearing E-CNY is both technically sophisticated and politically revealing. It could make payments faster, cheaper, and more efficient across China’s economy, while strengthening the yuan’s role in domestic and cross-border finance.

Yet the same features that make the digital yuan attractive — programmability, traceability, and central oversight — also raise enduring questions about privacy and financial autonomy. As China pushes deeper into digital money, the success of E-CNY may ultimately depend on whether efficiency gains can outweigh growing concerns over surveillance in an increasingly cashless society.