December 31, 2025
By Anjali Kochhar
China is taking a major step to expand the use of its digital currency by allowing interest to be paid on holdings of the digital yuan, a move aimed at making the central bank issued currency more attractive to consumers and businesses. Beginning January 1, 2026, commercial banks will be allowed to pay interest on balances held in digital yuan wallets, according to officials at the People’s Bank of China.
The policy marks a significant change in how the digital yuan, also known as the e-CNY, is positioned. Until now, it has largely functioned as a digital version of cash and has not earned interest. By permitting interest payments, authorities are effectively turning the digital yuan into a deposit like instrument, bringing it closer to traditional bank accounts in terms of functionality and appeal.
Lu Lei, deputy governor of the People’s Bank of China, said the change is designed to strengthen adoption of the digital yuan by giving users a financial incentive to hold balances in the currency. Banks will be able to offer interest rates on digital yuan holdings in line with existing deposit pricing rules. These balances will also be covered by China’s deposit insurance scheme, providing additional reassurance to users.
China has been a global leader in developing central bank digital currencies, with pilot programs running in dozens of cities and millions of users having access to the e-CNY. Transactions using the digital yuan have reached trillions of yuan in total value. Despite this progress, everyday usage has remained limited, partly because consumers continue to rely heavily on established mobile payment platforms such as Alipay and WeChat Pay.
Analysts say paying interest could address one of the main weaknesses of the digital yuan. As a non interest bearing form of money, it offered little reason for users to keep funds in e-CNY wallets beyond short term spending. With interest payments, the digital yuan could become a more viable store of value, encouraging people to maintain balances for longer periods.
The policy is also expected to help banks integrate the digital yuan more deeply into their balance sheets and daily operations. By treating e-CNY holdings more like deposits, banks may be better able to manage liquidity and promote broader use of the currency across the financial system.
The move is part of a broader action plan by the People’s Bank of China to refine the management and operational framework of the digital yuan.
About the author
Anjali Kochhar covers cryptocurrency and blockchain stories in India as well as globally. Having been in the field of media and journalism for over four years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.
