JRI Research Journal;Vol.9 No.13,
The Shift in China's CBDC (Digital Yuan) Policy and Key Implications
Kengo Katsurada
Summary
In January 2026, the People's Bank of China (PBOC) repositioned the digital yuan (e-CNY), China's central bank digital currency (CBDC), from "digital cash" to "digital deposits."
Initially, the digital yuan was designed as a liability of the central bank and was intended primarily as a substitute for cash in domestic retail payments. Although it has not been formally issued, the PBOC has conducted pilot tests involving real-world use since 2020.
However, the use of the digital yuan has stagnated in China, where private mobile payment platforms such as Alipay and WeChat Pay are already widely used, offering superior convenience. In addition, financial institutions responsible for its distribution face heavy operational burdens, including AML/CFT compliance, while having limited revenue opportunities, thereby weakening incentives for adoption.
Against this backdrop, the PBOC decided on three changes to the digital yuan: (1) reclassifying it from cash to deposits, (2) integrating it into the reserve requirement system, and (3) allowing it to bear interest. As a result, the digital yuan is defined as a liability of commercial banks, covered by deposit insurance, and structured to support credit creation, including lending.
Domestic and international think tanks have assessed that, following this policy change, the digital yuan has come to resemble tokenized deposits more closely than a conventional CBDC. They point out that allowing commercial banks to treat it in the same way as deposits could improve their incentives to support its adoption. Some also note that its use may increasingly shift toward corporate payments and that it could be utilized as a means of expanding crossborder transactions denominated in RMB.
Given these developments, there are two key points to watch regarding the digital yuan:
1. Amid a wide range of digital currency options – including CBDCs, tokenized deposits, and stablecoins – the digital yuan, which has come to resemble tokenized deposits, could gain traction as a new means of payment in China.
2. Through mBridge, an international project aimed at promoting CBDC-based cross-border payments, China is seeking to expand RMB-denominated transactions, including in areas such as energy trade. The digital yuan could serve as a catalyst for RMB internationalization.