The People’s Bank of China (PBOC) will launch a new digital yuan framework on January 1, allowing commercial banks to pay interest on their holdings in a move to incentivize broader adoption of the central bank’s digital currency.
The so-called “action plan” will change the digital yuan (e-CNY) from its current role as digital cash to digital deposit money, Lu Lei, deputy governor of the People’s Bank of China, wrote in an article published by state newspaper Financial News.
“The future digital yuan will be a modern means of digital payment and circulation issued and circulated within the financial system, with technical support and supervision provided by the central bank, which will possess the attributes of commercial bank liabilities, be account-based, support distributed ledger technology, and have the functions of monetary value measurement, store of value, and cross-border payment,” Lei wrote.
The plan also proposes establishing an international digital yuan trading center in Shanghai.
The People’s Bank of China began working on the digital yuan program in 2014 under the name Digital Currency Electronic Payment or DCEP project to investigate the benefits of CBDC.
The central bank launched the digital yuan in April 2022. It has since launched e-CNY as part of a pilot program to encourage its adoption.
