China CBDC Digital Yuan To Enter New Era on Jan. 1 — Here’s What’s Changing

China’s central bank digital currency (CBDC), the e-CNY or digital yuan, is set to enter a new phase on January 1, 2026, becoming interest-bearing and evolving into a digital deposit money system. This shift, announced by PBOC Vice Governor Lu Lei, aims to incentivize wider adoption by aligning the e-CNY with M1, which includes cash and demand deposits. Currently in a testing phase for over five years with millions of users, the e-CNY will now function as a liability of commercial banks under PBOC oversight, offering interest accrual on wallet balances.

Transaction volumes have already exceeded 7 trillion yuan ($986 billion) as of mid-2024, primarily in retail and domestic use cases. The new plan emphasizes full-scale integration into retail, government services, and international trade. The interest-bearing model is expected to improve institutional adoption by facilitating seamless integration with financial products like payroll and loans, and reducing friction in conversions.

The changes also include enhanced security and regulatory structure, with banks required to hold reserves against e-CNY balances, similar to traditional deposits. While the system will remain compatible with distributed ledger technologies, the PBOC aims to improve its monetary policy capabilities and address concerns about fraud and system failures.

(Source：CCN)