China has abandoned the defining premise of its digital currency. After a decade of positioning the e-CNY as digital cash, the People’s Bank of China reclassified it on 1 January 2026 as “digital deposit money”: an interest-bearing, account-based instrument that sits on the balance sheets of commercial banks rather than the central bank.

This is a concession that the original model possibly failed to win users, and a structural answer to the question that has stalled central bank digital currency design everywhere: how to launch a CBDC without hollowing out the banks.

In a paper published this month, CIGI senior fellow Alex He argues the redesign turns the e-CNY from a stalled pilot into “a more deeply integrated component of China’s financial system”, and a potential template for bank-dominated economies across Asia. 

A decade of pilots, 0.2% of payments

The numbers behind the pivot are stark. By November 2025, the digital yuan had processed 3.48 billion transactions worth a cumulative 16.7 trillion yuan, with roughly 230 million personal wallets and 18.84 million corporate wallets opened, according to figures cited by PBoC deputy governor Lu Lei.

Set against China’s payments market, that is marginal: PIIE’s Martin Chorzempa puts 2024’s e-CNY transactions at 4.2 trillion yuan, just 0.2% of the 1.3 quadrillion yuan that flowed through bank cards, WeChat Pay and Alipay that same year, in an analysis he frames as a lesson for Washington and Brussels as much as for Beijing.

He writes: “Much of the revamped e-CNY looks less like a stablecoin or CBDC and more like today’s financial system. The e-CNY will share many features with regular money, including deposit insurance coverage at the same levels, allowing banks to manage the assets and liabilities of their digital wallet balances.”

The paper attributes the stagnation to incentives. Consumers had no reason to leave Alipay and WeChat Pay. Merchants bore terminal and training costs with no upside.

Meanwhile, banks carried the operating burden of e-CNY circulation. However, they couldn’t fold holdings into their deposit and lending businesses under the digital cash designation, so they had no reason to push it.

Chorzempa’s analysis of the reform also flags two further design changes. The redesign strips out the features that would otherwise have “siphoned off bank deposits” and reduced banking-system liquidity, in his words, protecting the funding base banks rely on for lending. It also adds offline payment capability alongside distributed-ledger technology supporting smart contracts, though he is sceptical either feature does much to move adoption on its own, describing their near-term potential as “mostly latent” rather than a genuine driver of uptake.

Deposits, insurance and the run problem

The redesign attacks each disincentive at once. Digital yuan balances are now treated like conventional deposits: inside the statutory reserve system, inside deposit insurance, and available to banks as a funding source for lending. Non-bank payment institutions handling e-CNY must hold a 100% digital yuan reserve.

The paper argues that this resolves the disintermediation fear that has kept most central banks away from interest-bearing CBDCs.

If a digital yuan wallet is insured at the commercial bank level, the incentive to flee to central bank money in a crisis weakens. The paper is careful to note the design mitigates rather than eliminates run risk; insurance limits and the pull of sovereign money in a panic remain.

The interest rate itself won’t drive adoption. Current e-CNY deposits pay 0.05%, a level the paper describes as widely viewed as too low to move behaviour.

The mechanism matters more: banks can now build the digital yuan into wealth management, supply chain finance and SME liquidity products, which is where usage would actually compound.

The stablecoin subtext

The paper reads the pivot as a direct response to the US GENIUS Act and Hong Kong’s stablecoin regime, which Chinese policymakers see as extending dollar dominance into digital settlement.

In late 2025, the PBoC classified stablecoins as a restricted digital asset for the first time, and earlier discussion of offshore RMB stablecoins has receded.

The competitive logic is explicit: a state-backed, interest-bearing instrument with programmability narrows the functional gap with private stablecoins while keeping issuance sovereign.

For jurisdictions wary of dollar-linked stablecoins, that combination is the pitch.

Cross-border rails are the sharp end

For APAC treasurers and payments operators, the international architecture matters more than the relabelling.

The paper identifies cross-border settlement as where blockchain will be deployed at scale: Shubida, the payments gateway upgraded in 2025, connects Chinese banks to the mBridge multi-CBDC platform, while a Shanghai-based Digital RMB International Operations Centre adds blockchain services and digital asset platforms on the state-backed Chengfang Link framework.

The mBridge figures cited show 4,047 transactions totalling 387.2 billion yuan, with the e-CNY accounting for 95.3% of volume among participating currencies.

That concentration demonstrates Chinese commitment and exposes how far mBridge remains a renminbi vehicle rather than a genuinely multilateral one.

Alex He places the result in a three-way contest: China’s bank-integrated CBDC, the United States’ market-driven stablecoin ecosystem, and Europe’s privacy-first digital euro.

He concludes that China’s experience shows standalone digital cash has limited utility, and that a CBDC likely needs to live inside the commercial banking layer to gain share.

The open question the paper leaves for other jurisdictions, including the bank-dominated markets of Southeast Asia, is whether the account-based, interest-bearing structure can be adopted while stripping out the centralised transaction visibility that defines the Chinese model.