China’s central bank announced an overhaul of the digital yuan that will allow interest-bearing wallet balances starting January 1, 2026, signaling a shift from digital cash toward a digital deposit currency.

The move redefines the e-CNY as digital deposit money rather than cash, with a two-tier system where commercial banks issue wallets and manage deposits under central bank rules.

Banks will offer interest on verified e-CNY wallets, bringing digital yuan balances under the same deposit protections as traditional bank deposits.

Industry voices worry about greater central-bank control and data access for the e-CNY, raising privacy concerns.

The transition aims to improve cross-border use and bank-to-bank payments, easing remittances under projects like mBridge.

The policy seeks to boost adoption while preserving financial stability and central-bank oversight, reflecting years of research and pilots.

An international digital yuan operations center will be established in Shanghai as part of the plan.

Regulators note that stablecoins fall short on customer identification and anti-money laundering standards, highlighting risks of illicit use and cross-border flows.

The policy accompanies a broader clampdown on crypto activity, including a crackdown on mining and rising scrutiny of real-world asset tokenization and stablecoins.

China pursues a broader blockchain program and international pilots to expand the e-CNY ecosystem, including cross-border initiatives.

The framework is part of an Action Plan to expand e-CNY adoption and build supporting infrastructure, including the RMB International Operations Center for on-chain settlement and cross-border tools.

The overall strategy combines CBDC innovation with strict crypto bans to maintain monetary authority, with outcomes to be seen after the 2026 framework launches.