Digital Yuan 2.0 Is Here: Your Wallet Will Finally Earn Interest Starting January 2026

After a solid decade of research, testing, and real-world pilots, China’s digital yuan is about to get a major glow-up.

On December 29, Lu Lei (陆磊), Deputy Governor of the People’s Bank of China (Zhongguo Renmin Yinhang 中国人民银行), dropped some major news:
the digital yuan is officially moving from “Phase 1.0” to “Phase 2.0” — and it’s actually a game-changer for how the entire system works.

The central bank just published the “Action Plan for Further Strengthening the Digital Yuan Management Service System and Related Financial Infrastructure Construction,” and it goes live on January 1, 2026.

Here’s what you need to know right now:

• Digital yuan wallet balances will accrue interest for the first time.
• Banks holding digital yuan will follow reserve requirement rules.
• Non-bank payment institutions must maintain a 100% margin requirement.
• The entire system is shifting from “cash-based” to “deposit-based” money.

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Understanding the Shift: From Digital Cash to Digital Deposit Money

To really understand why this matters, let’s rewind.

China’s central bank started exploring digital currency way back in 2014 with theoretical research and closed-loop testing.

Fast forward to 2016: the People’s Bank of China (PBOC) rolled out the Digital Currency Electronic Payment (DC/EP) framework and began piloting what we now call the digital yuan (e-CNY).

The Digital Currency Research Institute (Shuzi Huobi Yanjiusuo 数字货币研究所) at PBOC eventually completed the first-generation prototype — what they call “Digital Yuan 1.0” — which was designed to work like physical cash.

And it worked.

China became the first country in the world to successfully create a “central bank-to-commercial institution” two-tier operating system for digital currency.

Pretty wild when you think about it.

Where We Are Right Now (November 2025)

The digital yuan isn’t some theoretical experiment anymore.

Here’s the actual usage data as of late November 2025:

• 3.48 billion cumulative transactions processed.
• ¥16.7 trillion RMB ($2.32 trillion USD) in total transaction volume.
• 230 million individual digital yuan wallets opened through the official app.
• 18.84 million corporate wallets in operation.

On the cross-border side, the Multilateral Central Bank Digital Currency Bridge (mBridge) — a blockchain-based payment system connecting multiple central banks — has processed some serious volume:

• 4,047 cross-border payment transactions to date.
• ¥387.2 billion RMB ($53.8 billion USD) total transaction value.
• Digital yuan accounts for 95.3% of all mBridge traffic across all currencies.

Translation: the digital yuan is already dominating the cross-border central bank digital currency space.

According to the central bank, among all the digital currency projects being pursued by central banks worldwide, the digital yuan is still in the lead.

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The Real Problem: Why Phase 2.0 Was Necessary

So if the digital yuan is already crushing it, why the major overhaul?

As digital payments have evolved globally, central banks are hitting some serious friction points.

Lu Lei outlined four major challenges that every central bank is grappling with:

1. Rapid digital payment innovation is messing with monetary regulation — it’s hard to control money supply when payment technology keeps changing.
2. Risk of financial “disintermediation” — if everyone moves to central bank digital currency directly, commercial banks get cut out of the equation, and that’s a systemic risk.
3. Central bank liabilities vs. commercial bank responsibilities — who actually backs the money? This gets legally and financially messy.
4. Centralized control vs. decentralized technology — blockchain is supposed to be decentralized, but a government-issued digital currency needs to be centrally controlled. How do you balance that?

The new Action Plan is essentially China’s answer to all four of these problems.

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What’s Actually Changing: The Three Big Moves

1. Interest on Your Digital Yuan Balance (The Big One)

This is the headline feature everyone’s talking about.

Under the old system (Digital Yuan 1.0), the digital yuan was positioned as M0 — literally just cash in circulation — and it didn’t earn interest.

That made sense at the time.

But starting January 1, 2026, banking institutions will pay interest on digital yuan wallet balances held in real-name accounts.

The rates will follow self-regulatory deposit rate conventions, and these balances will be protected by deposit insurance (Cunkuan Baoxian 存款保险).

Translation: your digital yuan acts more like a traditional savings account now.

Why does this matter?

Zou Chuanwei (邹传伟), Dean of the Jiangsu Jinke Institute of Digital and Fintech, has explained that this move gives the digital yuan stronger monetary elasticity.

By moving beyond the “cash-only” M0 positioning, the digital yuan can now:

• Support credit activity and the deposit multiplier effect.
• Function more like traditional bank deposits.
• Give the central bank more tools to manage the money supply and interest rates.

This is a big deal from a monetary policy perspective.

2. Banks Must Treat Digital Yuan Like Regular Deposits

Here’s the structural shift:

Digital yuan held by banking institutions will now be integrated into the reserve requirement framework.

That means:

• Banks have to count their digital yuan holdings when calculating required reserves.
• Digital yuan is now treated as a liability on the bank’s balance sheet (just like regular deposits).
• This confirms that digital yuan wallets in banks are account-based commercial bank liabilities — not direct claims on the central bank.

This solves one of those systemic challenges we mentioned earlier: it keeps commercial banks in the middle of the financial system, preventing “disintermediation.”

3. Non-Banks Need 100% Margin Requirement

For non-bank payment institutions (think: fintech companies, payment apps, e-commerce platforms), the rules are stricter.

They need to maintain a 100% margin requirement for digital yuan they hold.

That means for every unit of digital yuan they’re holding on behalf of customers, they need to have 100% backing in collateral.

This is a regulatory guardrail to make sure non-banks can’t take unnecessary risks with digital yuan.

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The Tech Stack: “Account System + Coin Strings + Smart Contracts”

Now here’s where it gets interesting from a technology perspective.

Lu Lei explained that the digital yuan doesn’t reinvent the wheel — it builds on the mature infrastructure of traditional bank accounts.

The new architecture is defined as:

“Account System + Coin Strings + Smart Contracts”

Let’s break down what each part does:

• Account System: Traditional bank account infrastructure — the boring but reliable foundation.
• Coin Strings: Digital yuan tokens that can be issued and tracked across the system.
• Smart Contracts: Programmable logic that automates transactions and enables conditional payments.

This hybrid approach is key because it allows the digital yuan to:

• Integrate seamlessly with existing banking systems.
• Maintain compliance with Chinese financial regulations.
• Support programmable features through smart contracts.
• Work with blockchain technology where it makes sense (especially in “closed-loop” applications).

Where Blockchain Actually Gets Used

• Utility bill payments and verification
• Medical insurance claim settlement
• Social security fund distribution
• Green energy trading and carbon credit tracking

Not every transaction needs blockchain — that’s overkill.

But the Action Plan specifically calls for using blockchain (or distributed ledger technology) in “closed-loop” sectors where it creates real efficiency gains:

• Public utilities (Gongyong Shiye 公用事业).
• Medical insurance and social security.
• Green energy trading and carbon emission rights.

In these sectors, blockchain enables high-efficiency, low-cost multi-level fund management.

It’s not ideological — it’s pragmatic.

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Real-World Application: The Shanghai Digital Yuan International Operations Center

This isn’t all theory.

On September 25, 2025, China opened the Digital Yuan International Operations Center in Shanghai (Shanghai 上海) — a practical test of what the new system can do.

The center has three core platforms:

• Cross-border payments platform for moving digital yuan internationally.
• Blockchain services platform for settling complex transactions.
• Digital assets platform for trading blockchain-based assets.

The center operates 24/7 and is already supporting:

• Digital settlement of bills.
• Trade finance tools (like letters of credit).
• Carbon emission rights trading.

This is a live laboratory for testing Phase 2.0 in real conditions.

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Who’s Running This? The Current Operators

Currently, 10 official institutions operate the digital yuan system:

• Industrial and Commercial Bank of China (Gongshang Yinhang 工商银行 / ICBC)
• Agricultural Bank of China (Nongye Yinhang 农业银行 / ABC)
• Bank of China (Zhongguo Yinhang 中国银行 / BOC)
• China Construction Bank (Jianshe Yinhang 建设银行 / CCB)
• Bank of Communications (Jiaotong Yinhang 交通银行 / BOCOM)
• Postal Savings Bank of China (Youzheng Chuxu Yinhang 邮政储蓄银行 / PSBC)
• China Merchants Bank (Zhaoshang Yinhang 招商银行 / CMB)
• Industrial Bank (Xingye Yinhang 兴业银行 / IB)
• WeBank (Weizhong Yinhang 微众银行 — associated with WeChat/Tencent (腾讯))
• MYbank (Wangshang Yinhang 网商银行 — associated with Alipay/Ant Group)

But that’s not the end of the story.

More Banks Are Coming

During October 2025’s Financial Street (Jinrong Jie 金融街) Forum, Pan Gongsheng (潘功胜), Governor of the People’s Bank of China, confirmed that the central bank would optimize the digital yuan’s role and support more commercial banks in becoming operators.

We’re already seeing this in action.

Shanghai Pudong Development Bank (Pufa Yinhang 浦发银行 / SPD Bank) recently posted job listings for digital yuan developers and architects.

Translation: they’re actively applying to become an operating institution and designing systems to meet central bank requirements.

Expect more banks to follow suit in the coming months.

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What This Means: The Bigger Picture

Let’s step back and think about why this matters beyond just “oh, you can earn interest on digital yuan now.”

Phase 2.0 represents a fundamental shift in how central bank digital currencies can work.

By combining:

• Account-based infrastructure (familiar and compliant).
• Interest-bearing deposits (economically incentivizing adoption).
• Smart contracts (enabling programmable money).
• Blockchain in targeted use cases (efficiency where it matters).
• A multi-tier operating system (keeping commercial banks in the game).

…China is building a digital currency system that’s both technologically advanced and economically sensible.

It’s not replacing the banking system.

It’s upgrading it.

And it’s moving at scale.

With nearly 4 billion transactions already processed and ¥16.7 trillion RMB ($2.32 trillion USD) in transaction volume, the digital yuan is past the pilot stage.

Phase 2.0 is about taking what works and making it better — smarter, more flexible, more integrated into the actual financial system.

For investors, founders, and tech leaders watching the digital currency space, the digital yuan upgrade is worth paying attention to.

It’s not theoretical.

It’s shipping.

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References

• Digital Yuan Major Upgrade! Wallet Balances to Accrue Interest from 2026 – 21st Century Business Herald
• Progress of Digital Yuan Research and Development in China – People’s Bank of China
• China central bank vows to further expand digital yuan program – South China Morning Post