China Looks to Pay Interest on Digital Yuan Deposits to Drive Adoption

China is set to start paying interest on digital yuan deposits. This is part of a new Action Plan set to be implemented by the People’s Bank of China (PBC) starting January 1, 2026.

The Deputy Governor of the Chinese central bank, Lu Lei, disclosed this in a new article published by the country’s Financial Times.

Digital Yuan to Become Deposit Currency

According to Lei, the new framework will transform yuan from a digital cash to a deposit currency. This is expected to boost adoption of the central bank digital currency (CBDC).

The yuan is one of the leading CBDCs globally, with several efforts to boost its usage since China started exploring it in 2014. It has now been used to process 16.7 trillion yuan ($2.38 trillion) worth of transactions as of November 2025.

However, adoption has been lagging in China, with competition from other fintech giants such as Alipay and WeChat Pay. The new framework, which Lei claimed is based on a decade of research and pilot projects, seeks to address this challenge.

He said:

“On the basis of summarizing ten years of research and development pilot experience, the People’s Bank of China has issued the Action Plan on Further Strengthening the Digital RMB Management Service System and Related Financial Infrastructure Construction.”

Once the new framework becomes operational, banks will start treating yuan in the same manner as deposits. This would mean paying interest on verified digital yuan wallets and ensuring the same level of protection as traditional deposits.

The new framework will also acknowledge the risks and liability associated with the digital yuan for financial institutions. It has now introduced more flexibility for banks in managing their digital yuan balances, while non-bank institutions are required to maintain 100% reserve requirements.

Lei wrote:

“The future digital RMB is a modern digital payment and circulation means that the central bank provides technical support and implements supervision, has the liability attributes of commercial banks, is based on accounts, and is compatible with the characteristics of distributed ledger technology.”

China Targets International Markets With Digital Yuan

Meanwhile, China is also pushing for international adoption of its digital yuan. The Action Plan proposes the establishment of an International Operations Center in Shanghai.

Interestingly, blockchain technology is crucial to the cross-border ambitions of the country for its CBDC. The post by Lei noted the need to encourage a digital currency bridge with other central banks, highlighting the practical application blockchain technology for the digital RMB.

This aligns with hybrid structure for the digital yuan to be more than electronic payments and become digital payments with smart contract technologies. Interestingly, cryptocurrencies is banned in Mainland China.

Meanwhile, China is already pushing the adoption of the digital yuan with trading partners such as Singapore, Saudi Arabia, Thailand, and the United Arab Emirates. The country is also wants to expand its Cross-Border Interbank Payment System (CIPS) as an alternative to Society for Worldwide Interbank Financial Telecommunication (SWIFT).