China's Digital Yuan Set for Interest Payments as US Bans CBDCs

China is set to revolutionize its digital yuan by introducing interest payments on verified wallets starting January 1, 2026. This move comes as the US has banned central bank-issued digital currencies (CBDCs) entirely this year.

The policy shift was announced by Lu Lei, deputy governor of the People's Bank of China, in state newspaper Financial News. Commercial banks will pay interest on digital yuan balances according to existing deposit pricing agreements, transforming the currency into a deposit-like instrument.

This change aims to boost adoption of the digital yuan, which has struggled against dominant mobile payment platforms WeChat Pay and Alipay. By November 2025, China had processed 3.48 billion digital yuan transactions worth 16.7 trillion yuan ($2.38 trillion).

China is also expanding cross-border digital yuan initiatives, including planned pilots in Singapore, Thailand, Hong Kong, the United Arab Emirates, and Saudi Arabia.