China to let banks pay interest on digital yuan to drive adoption

China's central bank (PBOC) announced a major overhaul of the digital yuan (e-CNY) framework, effective January 1, 2026, which will allow commercial banks to pay interest on digital yuan holdings. This transition shifts the e-CNY from functioning as digital cash to a "digital deposit currency." The move aims to drive adoption, as the CBDC has struggled against established mobile payment platforms like WeChat Pay and Alipay. Under the new system, digital yuan balances will receive the same protection as traditional deposits, and banks gain more flexibility in managing these balances. This policy update follows accelerated efforts to promote the e-CNY, including expanding its cross-border use with partners like Singapore, Thailand, and the UAE.

(Source：The Block)