As the New Year's bells are about to ring, Beijing's financial circles are focused on the same thing: the People's Bank of China announced that starting January 1, 2026, digital yuan (e-CNY) will be eligible for interest. This move allows e-CNY to shed its "digital cash" label and officially enter the realm of investment assets. The timing of this development, coinciding with Trump's return to the White House and the accelerated fragmentation of the global financial landscape, has instantly garnered immense attention.
From M0 to Interest-Bearing: The Nature of Money Has Been Rewritten
According to the Financial Times , e-CNY will transform from non-interest-bearing circulating cash (M0) into "digital deposit money." Vice Governor Lu Lei wrote in the Financial Times that the new framework allows commercial banks to pay interest on e-CNY held by customers and includes it in deposit insurance coverage. For ordinary users, money previously kept in digital wallets was eroded by inflation; now, it can earn stable returns, significantly increasing the incentive to hold it.
Bank balance sheets reshuffled
Commercial banks play a key role in this new system: e-CNY balances are considered "interest-bearing liabilities" and can be directly incorporated into their asset and liability management tools. As of the end of November 2025, the cumulative transaction volume of e-CNY reached RMB 16.7 trillion, with 3.48 billion transactions. Once these liquid funds become tied up due to interest incentives, they will inject new sources of liabilities into banks and may also change deposit structures and liquidity allocation.
The policy also raised the reserve requirement threshold for non-bank payment institutions, significantly weakening the advantage of Alipay and WeChat Pay in the liquidity race. The central bank's combination of "national credit + interest rates" gives commercial banks leverage to compete with the tech duopoly for idle user funds. Lu Lei publicly emphasized:
"We are pushing the digital yuan to transform from a simple payment tool into a digital deposit currency with both security and yield attributes, which is crucial for strengthening the governance of financial infrastructure."
New bargaining chips in the geopolitical and financial game
With the Trump administration returning to the White House in 2025, pressure for financial decoupling between the US and China will intensify again, and Beijing urgently needs a cross-border settlement route that can bypass SWIFT. Through the mBridge project , China is accelerating its collaboration with the central banks of partners such as Hong Kong, Thailand, and the UAE. If e-CNY itself carries interest, the opportunity cost for overseas companies holding RMB will be significantly offset, helping to increase their willingness to use it in cross-border trade.
For China, the interest-bearing function is not merely a technological upgrade, but a crucial piece in its efforts to gain a stronger voice in the internationalization of the RMB. Faced with a strong dollar and pressure from global supply chain restructuring, Beijing is using e-CNY to provide a channel parallel to the dollar system, attempting to seize control of the next round of international clearing standards.
A test of market trust is about to begin.
The promotion of central bank digital currency has been underway for a decade, and the real challenge lies in whether users and businesses are willing to treat e-CNY as a long-term asset. While the interest rate mechanism increases attractiveness, it also introduces new variables into banks' liquidity management and interest rate pricing. Key indicators for 2026 will focus on the penetration rate of e-CNY in three areas: retail payments, market share, and cross-border settlement.
As the countdown to New Year's Day 2026 begins, the People's Bank of China has delivered its answer to redefining the form of currency. Whether this state-led upgrade to digital currency can carve out new financial territory beyond the US dollar remains to be seen, and the market is about to provide its most direct response.
