The People’s Bank of China (PBOC) will introduce a new framework for the digital yuan on January 1, enabling commercial banks to offer interest on holdings to promote wider acceptance of the central bank digital currency.
This “action plan” will transition the digital yuan (e-CNY) from being digital cash to functioning as digital deposit money, according to Lu Lei, a deputy governor of the People’s Bank of China, as stated in an article featured in the state newspaper Financial News.
“The future digital yuan will act as a contemporary digital means of payment and circulation within the financial system, supported and supervised by the central bank, exhibiting attributes of commercial bank liabilities, based on accounts, compatible with distributed ledger technology, and serving functions such as a measure of value, a store of value, and facilitating cross-border payments,” Lei articulated.
The initiative also recommends the establishment of an international digital yuan operations center in Shanghai.
The PBOC initiated work on the digital yuan program in 2014, originally referred to as the Digital Currency Electronic Payment or DCEP project, to investigate the advantages of a CBDC.
The central bank rolled out the digital yuan in April 2022. Since then, it has distributed e-CNY through a pilot program to encourage uptake.
