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 bid to encourage wider adoption of the central bank’s digital currency.
The so-called “action plan” will shift the digital yuan (e-CNY) from its current role as digital money to that of a digital deposit currency, Lu Lei, deputy governor of the People’s Bank of China, wrote in an article published by state-run Financial News.
“The future digital yuan will be a modern digital payment and circulation medium issued and disseminated within the financial system, with technical support and supervision provided by the central bank, possessing the attributes of commercial banking liabilities, account-based, compatible with distributed ledger technology, and having the functions of monetary value measurement, store of value and cross-border payment,” Lei wrote.
The plan also proposes establishing an international digital yuan operations center in Shanghai.
The PBOC began working on the digital yuan program in 2014 under the name Digital Currency Electronic Payment Project or DCEP to research the benefits of CBDC.
The central bank launched the digital yuan in April 2022. Since then, it has released e-CNY as part of a pilot program to encourage its adoption.
