Interest payments to start for China’s digital yuan in 2026

A significant shift away from global views on central bank digital currencies has been made with the decision to allow China’s digital yuan to earn interest starting in January 2026. Wallet balances will now accrue interest at demand deposit rates, marking a shift from the widely held view that retail CBDCs should function purely as digital cash.

Central banks in Europe and the United States have long argued against interest-bearing CBDCs, warning they could destabilise financial systems by drawing deposits away from commercial banks.

Institutions such as the European Central Bank, the Federal Reserve and the Bank for International Settlements have stressed that digital currencies should not become savings instruments.

China’s move, however, effectively repositions the digital yuan closer to a deposit-like form of money rather than a simple cash substitute.

The policy applies to verified individual and corporate wallets, while anonymous wallets remain excluded. Digital yuan balances are also now covered by China’s deposit insurance scheme, offering the same protection as bank deposits.

Analysts say these design choices, combined with China’s two-tier distribution model that keeps commercial banks as intermediaries, aim to limit risks of bank disintermediation while encouraging wider adoption.

China’s decision could influence global debates as dozens of countries continue to explore the use of digital currencies. While Europe remains committed to a non-interest-bearing digital € and the United States has formally banned a retail CBDC, China is testing whether an interest-paying digital currency can coexist with traditional banking.

The experiment is likely to be closely watched as policymakers reconsider what role digital money should play in future financial systems.

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