China’s central bank has introduced interest payments on its digital currency, the e-CNY, as part of efforts to boost its adoption for cross-border transactions.
The People’s Bank of China (PBOC) began offering interest on its central bank digital currency (CBDC), marking a unique feature in CBDCs. This initiative aims to encourage the use of e-CNY, especially in cross-border payments where the US dollar currently dominates.
Verified digital wallets will now earn 0.05% annual interest on their e-CNY balances, equivalent to the benchmark rate for standard savings accounts at domestic commercial banks. Interest started accruing from January 1, 2026, and quarterly payments are set to commence in March through institutions such as Industrial and Commercial Bank of China and China Construction Bank.
Cross-border payment strategy
The PBOC launched a research organization in 2014 to develop the digital CNY, initially focusing on domestic retail applications. Individuals and businesses can create digital wallets and convert traditional CNY into e-CNY. Pilot testing began in Shenzhen in October 2020 and has since expanded to 26 regions as of September 2025. By the end of 2025, cumulative e-CNY transactions reached CNY 19.5 trillion (USD 2.8 trillion), according to Chinese media. The system supported 230 million individual digital wallets and 19 million business wallets.
China has also emphasized the cross-border use of the digital CNY. Pilot programs launched in 2024 with countries such as Saudi Arabia and Thailand, aiming to facilitate trade and financing payments in e-CNY through commercial banks and the PBOC. The system utilizes blockchain technology for transaction management.
The PBOC claims that this testing system reduces transaction times from days or up to a week under the SWIFT correspondent banking system to seconds, while also slashing fees by up to 50%.
Adoption challenges persist
Cross-border digital yuan transactions seek to reduce reliance on the US dollar and support CNY internationalization. However, China’s capital controls, which restrict foreign exchange transactions by individuals, remain a significant barrier to wider adoption.
Domestic uptake has also been limited. Cashless payments account for over 80% of private final consumption expenditure in China, as calculated by the Payments Japan Association. These transactions are mainly handled by private mobile payment platforms WeChat Pay and Alipay, which hold about 47% and 32% market share respectively, totaling around 80%. Both platforms already offer interest on linked bank accounts, making the addition of interest to e-CNY less appealing for many users.
No official timeline has been set for the full launch of e-CNY. The Chinese Communist Party’s five-year plan covering 2026 to 2030 includes a commitment to steady development of the digital CNY but provides no specific roadmap.
