China's central bank has introduced interest payments on its digital currency as part of efforts to increase adoption for cross-border transactions.
Following this announcement, the People's Bank of China (PBOC) has begun offering interest on its central bank digital currency (CBDC), marking the first time a CBDC has included this feature. The move represents an attempt to drive uptake of the digital CNY, known as e-CNY, particularly for cross-border payments where the USD currently dominates.
In addition, it was reported that verified digital wallets will now receive 0.05% annual interest on their e-CNY balances, matching the benchmark rate for standard savings accounts at domestic commercial banks. Interest began accruing on 1 January 2026, with quarterly payments set to begin in March through institutions including Industrial and Commercial Bank of China and China Construction Bank.
The digital EUR, expected to launch from the European Central Bank in 2029 at the earliest, is not planned to include interest payments.
Cross-border payment strategy
The PBOC established a research organisation in 2014 to develop the digital CNY, initially focusing on domestic retail applications. Individuals and businesses will have the possibility to create digital wallets and convert CNY into e-CNY. Pilot testing with public participation started in Shenzhen in October 2020 and has since expanded to 26 regions as of September 2025. By the end of 2025, cumulative e-CNY transactions had reached CNY 19.5 trillion (USD 2.8 trillion), according to Chinese media. The system supported 230 million individual digital wallets and 19 million business wallets.
China has also increasingly prioritised cross-border use of the digital CNY. Pilot programmes launched in 2024 with countries including Saudi Arabia and Thailand, aiming to allow businesses to send trade and financing payments in e-CNY through commercial banks and the PBOC. The system uses blockchain technology to manage transactions, balances, and related information.
The PBOC states that the current testing system reduces transaction times from days or up to a week under the SWIFT correspondent banking system to seconds, while also cutting fees by up to 50%.
Adoption challenges persist
Cross-border digital yuan transactions aim to reduce reliance on the USD and support CNY internationalisation. However, China's capital controls, which limit foreign exchange transactions by individuals, remain a structural obstacle to broader adoption.
Furthermore, domestic uptake has also been limited. Cashless payments account for more than 80% of private final consumption expenditure in China, according to calculations by the Payments Japan Association. These transactions are dominated by private mobile payment platforms WeChat Pay and Alipay, which hold approximately 47% and 32% market share respectively, totalling around 80% combined. Both WeChat Pay and Alipay require links to bank accounts that already earn interest. The addition of interest to e-CNY is expected to therefore offer limited differentiation, and acceptance of the digital CNY remains relatively constrained.
No official timeline has been set for the full launch of e-CNY, as the Chinese Communist Party's five-year plan covering 2026 to 2030 includes a commitment to the steady development of the digital CNY but provides no specific roadmap.
