Prime Highlight
- China will roll out a new action plan from January 1 to strengthen the management, use, and ecosystem of its digital yuan (e-CNY).
- Banks may start paying interest on digital yuan balances to encourage wider adoption and usage of the currency.
Key Facts
- The plan includes creating an international digital yuan operations centre in Shanghai to support global use and cooperation.
- China has been developing the digital yuan since 2014 and has tested it through pilot programmes for payments in transport, shopping, and public services.
Background
China will roll out a new “action plan” for its digital yuan from January 1 to strengthen the management and use of the central bank’s digital currency, according to a senior official of the People’s Bank of China (PBoC).
Lu Lei, Deputy Governor of the PBoC, said the next phase will introduce a new generation system for the digital yuan, also known as e-CNY. The framework will include clear measurement rules, management systems, operating mechanisms, and a full ecosystem to support its growth.
A key feature of the action plan proposes that banks pay interest on digital yuan balances held by users. Authorities hope this incentive will encourage people to store and use more funds in the digital currency.
The plan also includes a proposal to set up an international digital yuan operations centre in Shanghai, China’s major financial hub. The centre is expected to support global cooperation and overseas use of the digital currency in the future.
The central bank issues and controls the digital yuan as a modern form of payment. It works within the financial system and differs from private cryptocurrencies like Bitcoin, which governments do not back.
China began developing its digital currency in 2014 and has already tested it through pilot programmes in several cities. These trials allowed consumers to pay for transport, shopping and public services using e-CNY wallets.
Although mobile and online payments are already common across China, the digital yuan gives the central bank greater control over data and transaction flows. This reduces reliance on major technology platforms that currently dominate the payments space.
Central banks around the world are studying digital currencies after the pandemic pushed more people towards cashless payments. With the new action plan, China aims to take the next big step in turning the digital yuan into a widely used and trusted national currency.
