Digital RMB starts accruing interest in 2026! Earn interest passively and revolutionize traditional payments

Vice President of the People’s Bank of China, Lu Lei, revealed that the digital yuan will launch the 2.0 era on January 1, 2026. The core transformation is that real-name wallet balances will start earning interest, upgrading from “digital cash” to “digital deposits.” It will also be incorporated into the deposit insurance system, enjoying national-level security guarantees, and will feature programmable capabilities with smart contracts.

Unveiling the Interest Mechanism of Digital Yuan 2.0: How Much Can You Earn?

The most attractive change in Digital Yuan 2.0 is the interest income. According to the “Action Plan for Further Strengthening the Management Service System of Digital Yuan and Related Financial Infrastructure,” banking institutions will accrue interest on the balances of first, second, and third-class real-name digital yuan wallets, with interest rates referencing the prevailing deposit rates of each bank. Currently, major Chinese banks offer savings interest rates of about 0.2% to 0.25%, meaning if you store 100,000 yuan in a digital yuan wallet, you could earn approximately 200 to 250 yuan in interest over a year.

The fundamental difference from WeChat Pay and Alipay is that the latter are only third-party payment tools, and their balances do not generate interest (unless transferred into financial products like Yu’ebao). Digital yuan, as legal tender, automatically accrues interest on wallet balances without additional operations, and the payment experience remains unaffected. This “payment + earnings” dual feature will change users’ fund management habits.

It is worth noting that anonymous wallets, which only require a mobile number to open, will still retain small payment functions but will not accrue interest for the time being. This design balances convenience and compliance requirements. Anonymous wallets are suitable for small daily transactions, while large funds are recommended to be stored in real-name wallets to enjoy interest benefits. Lu Lei emphasized that the ability of accounts to generate interest is a key factor in currency innovation, and this adjustment will promote the implementation of more financial service scenarios.

From a user psychology perspective, the attribute of “money making money” will significantly enhance the attractiveness of the digital yuan. Previously, users stored idle funds in WeChat or Alipay mainly for payment convenience rather than earnings. After 2026, digital yuan will offer both convenience and returns, becoming a more rational choice. This incentive mechanism may trigger a reshuffle in the payment market; if WeChat and Alipay do not enhance the competitiveness of their financial products, they may face pressure of user fund outflows.

Deposit Insurance Protection: National-Level Security Guarantee

The second major upgrade of Digital Yuan 2.0 is its inclusion in the deposit insurance system. The operational regulations clearly state that digital yuan operated by banking institutions will be included in the deposit reserve base, with deposit insurance providing equivalent safety guarantees. This means that even if the operating bank encounters operational issues, users’ digital yuan deposits are protected by insurance up to 500,000 yuan, enjoying the same treatment as traditional bank deposits.

Non-bank payment institutions will implement 100% guarantee deposit requirements, further strengthening the safety of funds. This layered regulatory system ensures that different types of operating entities have strict risk control mechanisms. In comparison, while WeChat and Alipay also have reserve fund regulations, they are not part of the deposit insurance system, and their legal nature and protection levels differ.

The introduction of deposit insurance addresses the biggest user concern about the safety of digital currency. In the past, many worried, “What if the operating institution has issues with the money stored in the app?” Now, this problem has a clear answer: digital yuan enjoys state-level security backing. This sense of security will attract conservative investors and large fund users who previously hesitated to store large amounts of money in electronic wallets due to safety concerns.

From a financial stability perspective, including digital yuan in the reserve management system is also an important measure for the central bank to strengthen macroprudential management. Incorporating digital yuan wallet balances into the deposit reserve base allows the central bank to influence the supply of digital yuan by adjusting reserve ratios, creating synergy with traditional monetary policy tools. This system design not only grants digital yuan the legal status of “deposits” but also ensures it remains within the central bank’s regulatory framework.

Smart Contracts Empowerment: Money That Thinks

The programmable capability of smart contracts is a disruptive feature that sets digital yuan 2.0 apart from traditional currency. Traditional money is “dumb”—once transferred, control is lost. Digital yuan is “smart money”—it can be pre-programmed with rules and automatically executed, fundamentally reducing economic disputes and fraud risks. This capability is especially critical in cross-border trade; China’s promoted “mBridge” project uses blockchain technology to make cross-border funds as instant as sending an email, avoiding complex international intermediary banks.

Technically, digital yuan adopts a hybrid model of “accounts + blockchain.” Small daily payments use an account-based system, offering fast, efficient transactions, even offline via “touch-and-go.” Cross-border or large transactions leverage blockchain’s tamper-proof features to solve trust issues. This “combination of strengths” design ensures a seamless retail payment experience while satisfying security needs in complex scenarios.

Three Major Application Scenarios of Programmable Digital Yuan

Targeted Spending Management: Allowing parents to set rules such as “can only buy books at the bookstore, cannot top-up games” for children’s allowances through smart contracts. Companies issuing vouchers can also specify usage scope and validity, ensuring dedicated funds.

Wage Guarantee Mechanism: When construction wages are credited, smart contracts automatically prioritize transferring funds to migrant workers, eliminating wage arrears. This “automatic execution” is more efficient than traditional legal enforcement and addresses social issues at their root.

Prepayment Risk Control: Prepaid house payments can be set with conditions like “funds only transferred to developers after the building is topped out and inspected,” preventing project abandonment risks. Such conditional payment mechanisms will reshape trust in prepayment markets.

Deep Impact of the 2026 Transformation

The launch of digital yuan 2.0 is not aimed at replacing cash or eliminating third-party payments but at building a more efficient, secure, and intelligent monetary system. For ordinary users, the most immediate benefit is “making money with money”—idle balances automatically accrue interest, no longer dead money. For the financial system, incorporating digital yuan into reserve management enhances the central bank’s macro-control capabilities. For social governance, smart contracts will reduce numerous economic disputes and default risks.

Unlike cryptocurrencies like Bitcoin, which are speculative assets with volatile prices, digital yuan is backed by national credit and has absolutely stable value—1 yuan always equals 1 yuan. Bitcoin, on the other hand, is a speculative asset with significant price fluctuations and does not fulfill the basic functions of currency. Digital yuan is a “national team” currency innovation, not a decentralized financial experiment.

The full implementation on January 1, 2026, marks China’s leading position globally in central bank digital currencies. This is not just a technological upgrade but an evolution of currency form—an era of “interest-earning, insured, programmable” super currency is arriving.