China’s Digital Yuan

Why in News?

Holdings of China's digital yuan, or e-CNY, will start generating interest income under a new framework, as China steps up efforts to promote the use of its central bank digital currency.

The digital yuan (e‑CNY) kept in wallets will earn interest at demand deposit rates, making it the world’s 1^st central bank digital currency to pay interest.

• Digital yuan – It is officially known as the Digital Currency Electronic Payment (DCEP), and is the first state-backed digital currency.
• Issued by – The Chinese Central Bank and backed by the renminbi (RMB).
• Misconception – It can be mistaken that China’s DCEP is a form of Chinese government cryptocurrency; however, it is not entirely the same as how cryptocurrencies are known.
• Different from Cryptocurrency – Bitcoin, Ethereum, or even stablecoins are different because these currencies are mainly used for speculation and often require the support of a basket of currencies.
• Stability & Legal Tender Status – The digital yuan is not as volatile as cryptocurrencies because the digital currency is a legal tender and issued by the People’s Bank of China and backed by China’s currency.

• Benefits – The Digital Yuan enhances security, accessibility, convenience, and cost‑efficiency by centralising transactions under the Chinese government and removing third‑party intermediaries.

As of late 2025, the Bahamas, Nigeria, and Jamaica have fully launched national digital currencies (CBDCs), while China, India, EU, US, etc, are in advanced stages of research, testing, or planning for their own CBDCs.

To know about India’s e-Rupee, click here

References

1. Business times | China to pay interest on digital yuan
2. TCSS | China’s Digital Yuan