China’s e-CNY to Earn Interest From 2026

Transition to Interest-Bearing Digital Deposits

The digital yuan, known as e-CNY, launched officially in April 2022 following research that began in 2014 under the Digital Currency Electronic Payment project.

Until now, it functioned much like physical cash in digital form, categorized as M0 in the money supply.

The new framework reclassifies it as M1, akin to demand deposits, allowing commercial banks to treat e-CNY balances as liabilities on their books.

This means users with real-name verified wallets will earn interest based on prevailing demand deposit rates, a feature absent from most other central bank digital currencies worldwide.

Commercial banks play a central role in this two-tier system. The PBOC maintains oversight, issuing the currency and setting standards, while banks handle wallet openings, security, and payment services.

Non-bank payment institutions, such as those behind popular apps, must exchange e-CNY from fully reserved bank deposits.

To sweeten the deal for banks, the PBOC has set low reserve requirements for e-CNY operations, encouraging them to promote the currency actively. Balances also gain protection under China’s deposit insurance scheme, mirroring safeguards for traditional savings accounts.

Addressing Adoption Hurdles and Competition

Adoption has been a key challenge for the e-CNY. By the end of November 2025, it had facilitated 3.48 billion transactions totaling 16.7 trillion yuan, equivalent to about 2.3 trillion U.S. dollars.

While impressive, this represents a fraction of China’s overall payment volume, dominated by platforms like Alipay and WeChat Pay.

The interest feature addresses this gap by making e-CNY more attractive for holding larger sums, rather than just quick transactions. Users in pilot cities have already tested it in retail, transportation, and public services, but broader uptake lagged due to limited incentives compared to interest-bearing bank accounts.

This policy emerges amid China’s stringent stance on cryptocurrencies. In late 2025, authorities intensified crackdowns on Bitcoin mining and tokenized real-world assets, reaffirming a ban on crypto trading that dates back to 2021.

The PBOC emphasizes that e-CNY remains under centralized control, contrasting with decentralized tokens, and serves to prevent financial risks while supporting the real economy.

Deputy Governor Lu Lei highlighted in a recent article that the upgrade injects technological momentum into building a strong currency, laying the foundations for a modern financial system.

Expanding the Yuan’s Global Footprint

On the international front, the changes align with efforts to expand the yuan’s global footprint. Shanghai is slated to host an international operations center for e-CNY, facilitating cross-border settlements.

This builds on Project mBridge, a multi-CBDC platform involving China, Hong Kong, Thailand, the United Arab Emirates, and others.

Since its full launch in October 2025, mBridge has processed about 4,047 payments worth 387.2 billion yuan, with e-CNY comprising 95.3 percent of the volume. Such initiatives reduce reliance on traditional systems like SWIFT, potentially lowering costs for trade partners and challenging the U.S. dollar’s dominance in certain corridors.

At Bitedge, we view this as a calculated move to refine monetary policy transmission. By classifying e-CNY under reserve requirements, the PBOC gains finer tools to manage liquidity.

Associate Professor Xiang Haotian from Peking University’s Guanghua School of Management noted that low reserve ratios could motivate banks to integrate e-CNY into treasury operations, enhancing efficiency.

Meanwhile, Liu Xiaochun of the Shanghai Finance Institute pointed out that this makes China the first nation with an interest-bearing CBDC, underscoring its lead in digital innovation.

Technical Integration and Privacy Concerns

The rollout isn’t without hurdles. Integrating e-CNY into existing banking rails requires upgrades to infrastructure, ensuring compatibility with distributed ledger technology while maintaining security.

Privacy concerns persist, as real-name requirements for interest-eligible wallets could deter some users, though the PBOC insists on balanced data protection.

In cross-border scenarios, geopolitical tensions add complexity; Western regulators are likely to express worries about potential sanctions evasion, though no evidence links e-CNY to such activities.

Looking back, the e-CNY’s journey reflects China’s methodical approach to fintech. Early pilots in 2019 focused on retail in cities like Shenzhen and Suzhou, expanding to e-commerce and government salaries. Airdrops during events like the 2022 Winter Olympics showcased its offline capabilities, even in areas with poor internet.

These tests informed the current overhaul, addressing feedback on usability and incentives.

As 2026 approaches, market watchers anticipate a surge in e-CNY wallets, currently numbering in the hundreds of millions. Banks may compete by offering competitive rates, though specifics remain undisclosed.

This could pressure traditional deposits, prompting adjustments in savings products. Globally, it sets a benchmark for other CBDCs, like the European Central Bank’s digital euro or the U.S. Federal Reserve’s explorations, which lag in similar features.