China's e-CNY Transitions from Digital Cash to Deposit Money with New System

The People's Bank of China (PBC) has been working on evolving the e-CNY from digital cash to digital deposit money over the past decade. This transformation aims to deepen the form and functionality of the currency, making it more versatile and user-friendly.

e-CNY version 1.0 was introduced as a digital cash system that allows for fast and efficient transactions. However, with the rollout of e-CNY version 2.0, the system is now being designed to enable digital deposit money, which will allow users to hold deposits in their e-CNY wallets.

The new design incorporates distributed ledger technology (DLT) and smart contracts to ensure transparency, standardization, and interoperability. This hybrid architecture enables e-CNY to operate as a universal currency, supporting both online and offline transactions across various sectors, including wholesale and retail, education, healthcare, and cross-border settlement.

e-CNY has recorded significant growth since its introduction, with over 3.57 billion total transaction volume and a total transaction value of 19.5 trillion yuan ($2.9 trillion) by the end of 2025. The e-CNY App has opened 230 million personal wallets and 19.08 million corporate wallets.

The PBC is aware that digital currency initiatives face challenges such as financial disintermediation, new forms of 'currencies' circulating outside the formal financial system, and sharp fluctuations in prices linked to these assets. To address these issues, central banks must harness the advantages of digital payment tools while maintaining orderly market development and ensuring macroeconomic management.