The People's Bank of China (PBOC) has announced an "action plan" to drastically overhaul the digital yuan's operational framework. This plan, which will take effect on January 1, 2026, will comprehensively transform the responsible issuance, management, and utilization of central bank digital currencies (CBDCs).
This measure focuses on concluding the development and pilot operation of the digital yuan, which has lasted nearly a decade, and laying the foundation for its practical nationwide implementation. In particular, the central bank is committed to faithfully reflecting the fundamental attributes of legal tender, including the issuance and circulation functions of the digital yuan, as a store of value, and cross-border payment capabilities.
According to Chinese economic media reports, Lu Lei, Vice Governor of the People's Bank of China, stated that the new digital yuan system will simultaneously ensure technical stability and manageable efficiency within the monetary system, and that the central bank will directly provide technical support and supervision. He emphasized, "The digital yuan will function as a monetary unit, store of value, and cross-border payment system, and will become a key means of ensuring financial stability in the future."
A two-stage structure introduces an interest payment system for digital assets.
A key element of the implementation plan is the "two-tier operating structure." Under this structure, commercial banks and financial institutions holding digital yuan will pay a fixed interest rate to asset holders. Individual banks will be able to manage their assets and liabilities autonomously based on the balances held in their digital yuan wallets, a move considered a "compatible incentive system."
This distinguishes it from existing cash and mobile payment systems. It is interpreted as an attempt to increase the practical value of the digital yuan and encourage its voluntary adoption by the public.
Establishing an operations center in Shanghai... Focusing on blockchain and cross-border development.
The Chinese government previously launched the Digital Yuan Operations Center in Shanghai, serving as a physical foundation for the nationwide expansion of the digital yuan. The center oversees three key areas: a global payment network for cross-border payments, digitalization support utilizing blockchain services, and digital asset platform development.
Additionally, the People's Bank of China plans to establish a dedicated organization, the "Digital Yuan Management Committee," to internally oversee the management of the digital yuan, which will clearly coordinate the work of each business operator and clarify supervisory responsibilities by function.
Overcoming Past Failures...Reset Strategy Following mBridge's Discontinuation
Through this "action plan," China aims to overcome the failures of past international cooperation projects. A prime example is the "mBridge" project, a multilateral cross-border payment network that had garnered significant attention. Last year, the Bank for International Settlements (BIS) withdrew from the project, citing concerns about potential misuse of the technology. The project was also criticized for potentially being a means of sanctions evasion, ultimately dealing a significant blow to its global expansion strategy.
Meanwhile, China has ambitiously introduced the digital yuan since 2019, but its adoption has been hampered by intensifying competition from existing mobile payment systems like Alipay and WeChat Pay, as well as low adoption among general consumers. Charles Chang, Director of Fudan University's Fintech Research Center, explained, "The digital yuan still faces several bottlenecks in practical use."
The future direction of the digital yuan will likely depend on the central bank's operational capabilities, coordination of interests with the private sector, and how effectively it captures user demand.
๐ Market Interpretation
The People's Bank of China's digital yuan "action plan" is interpreted as a strategy to leave behind failed international projects and focus on a domestically-focused digital financial infrastructure. In particular, the two-tier system, including the interest payment structure, increases the potential for CBDC assetization and can serve as a model for other countries.
๐ก Strategy Points
- Digital yuan to be fully operational from January 2026.
- Interest payment system based on user balance
- Building a global payment and blockchain platform centered on the Shanghai Operations Center.
๐ Glossary
- Digital Yuan (CBDC): Central bank digital currency issued by the People's Bank of China
- Two-tier operating structure: A model in which the central bank and private banks jointly handle currency issuance and circulation.
mBridge: A multilateral cross-border payments project led by the BIS has been suspended due to technical issues.
๐ก Want to know more? AI-prepared questions for you:
A. This plan aims to systematically operate the digital yuan and improve financial infrastructure. Starting in January 2026, the central bank digital currency (CBDC) will be officially issued and circulated, expanding its role within the financial system.
A. Financial institutions that hold digital yuan will pay interest based on the size of their customers' digital asset balances, and banks will be able to independently manage these assets.
A. mBridge, an international payment project, has faced difficulties in expanding its reach due to factors such as the BIS's departure, stagnant user adoption, and competition with existing mobile payment systems.
A. We will establish the technical foundation for the digital yuan, including cross-border payment infrastructure, blockchain services, and the development of a digital asset platform, and oversee its operations.
TP AI Precautions
This article was summarized using a TokenPost.ai-based language model. Key points in the text may be omitted or inaccurate.
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