China Permits Interest on Digital Yuan from 2026

China's central bank announced on Monday that starting January 1, 2026, commercial banks will be permitted to pay interest on digital yuan holdings, marking a pivotal shift in the currency's framework to boost its adoption among individuals and businesses.

The People's Bank of China (PBOC) detailed the changes in an action plan that reclassifies the digital yuan, also known as eCNY, from a form of digital cash to digital deposit money. This adjustment integrates the currency more deeply into the banking system, treating balances similarly to traditional deposits and extending coverage under China's deposit insurance scheme. Banks will manage these holdings as part of their regular operations, setting interest rates according to existing industry agreements. Nonbank payment institutions must maintain a 100 percent reserve ratio for their digital yuan reserves to ensure stability.

Lu Lei, a deputy governor at the PBOC, outlined the policy in an article published by the state-affiliated Financial News. "The future digital yuan will be a modern digital payment and circulation means issued and circulated within the financial system, with technical support and supervision provided by...