China Unveils Action Plan to Integrate Digital Yuan Into Core Banking System

Highlights:

• China will let banks pay interest on digital currency wallets to support wider everyday use.
• Regulators will tighten control by enforcing full reserves on the digital yuan.
• Authorities will expand the use across borders as it reviews yuan-backed stablecoin plans.

China’s central bank has confirmed January 1, 2026, as the start date for its updated digital currency framework. The People’s Bank of China released the action plan after nearly ten years of pilots. Officials have stated that the framework will improve management and operational clarity. The central bank will provide technical support and direct supervision. Authorities aim to strengthen efficiency within the existing financial system.

The framework defines the currency as issued and circulated through regulated financial institutions. It will function as a unit of account, a store of value, and a payment tool. Officials also confirmed support for cross-border payments. The design relies on account-based usage rather than anonymous circulation.

The system adopts a two-tier architecture that places commercial banks at the center of distribution. Banks will manage wallets and handle customer relationships. Meanwhile, the central bank will control issuance and core infrastructure. Officials said the model mirrors traditional cash distribution channels. As a result, the framework avoids disruption to current banking operations.

At the governance level, the plan introduces a Digital RMB Management Committee. The committee will coordinate business lines and supervisory responsibilities. Officials said this structure will clarify internal roles. It will also improve oversight across departments.

Digital Yuan Interest Payments Redefine Bank Wallet Balances

The action plan enables commercial banks to offer interest on eligible wallet balances beginning in 2026. This shift moves the currency beyond pure cash-style use. Officials described the move as a shift towards deposit-like functionality. Banks will charge interest according to the prevailing self-regulatory arrangements.

Authorities confirmed that wallet balances will receive deposit-style protection. Holdings will fall under China’s deposit insurance system. Officials expect this protection to improve user confidence. Banks can now treat wallet balances like other deposits.

The plan also sets clear rules for non-bank payment institutions. These firms must maintain a 100% reserve ratio for digital currency funds. Officials stated that the requirement matches current customer reserve standards. The rule aims to reduce liquidity and operational risks.

Meanwhile, the People’s Bank of China recently warned against virtual currency speculation amid rising crime and market risks. Authorities said firm oversight supports a state-controlled model. Adoption has been slower than anticipated despite the earlier pilots. Users still prefer existing mobile payment systems. According to the officials, interest incentives will help overcome user hesitation.

Cross-Border Expansion Plans Follow Slower Domestic Adoption

China has accompanied domestic reform with new cross-border ambitions. The government recently opened a centre of digital currency operations in Shanghai. The center facilitates cross-border payment rails and associated platforms. Government leaders termed the action as a component of a wider global growth. The emphasis, according to authorities, is on controlled and regulated usage.

Alongside the digital yuan plans, Reuters recently reported that China is reviewing yuan-backed stablecoin proposals. The roadmap could reach the State Council for approval this month. Officials see the idea as a way to expand global financial influence.

Transaction data records indicate a consistent growth even in the face of adoption challenges. As of late November this year, users had made 3.48 billion transactions. The aggregate value was 16.7 trillion yuan. Authorities hope that interest payments will increase regular use.