China’s central bank aims to accelerate the use of the digital yuan by transforming it from digital cash into an interest-bearing digital deposit instrument.
The People's Bank of China has unveiled one of the most significant changes to its digital currency strategy to date. According to Vice Governor Lu Lei, the digital yuan will move to a new framework starting January 1, 2026, transitioning away from a digital cash model toward a digital deposit structure.
Under the new arrangement, commercial banks will begin paying interest on verified digital yuan wallet balances. These rates will align with existing self-regulatory agreements governing deposit pricing. Digital yuan holdings will also receive the same protection as traditional bank deposits under China’s deposit insurance system.
Lu Lei noted that the updated system gives banks greater flexibility to integrate digital yuan balances into their asset liability management processes. For non-bank payment institutions, digital yuan reserves will be treated in line with customer fund reserves and subject to a 100 percent reserve requirement.
By the end of November 2025, a total of 3.48 billion digital yuan transactions had been processed across China, with cumulative transaction volume reaching 16.7 trillion yuan. This figure corresponds to roughly 2.38 trillion dollars, highlighting the scale the system has already achieved despite earlier adoption challenges.
