PBOC to Launch ‘Digital Yuan 2.0’ in Jan 2026, Signaling Shift to Deposit-Based Model

BEIJING — The People's Bank of China (PBOC) is set to initiate a major overhaul of its central bank digital currency (CBDC) framework, with the “New Generation Digital RMB” system scheduled to go live on January 1, 2026.

From Cash to Digital Deposits

According to Deputy Governor Lu Lei, the updated framework marks a theoretical and structural shift from a “Digital Cash” (M0) model to a “Digital Deposit Money” (M1/M2) approach. Key changes include:

1. Reserve Management: Commercial banks' digital yuan wallets will be included in the unified deposit reserve management system, treating the digital currency as a liability of the commercial bank rather than just the central bank.
2. Interest Potential: The new guidelines imply a mechanism where banks could pay interest on digital yuan wallet balances, aligning them closer to traditional savings accounts rather than physical cash.
3. Smart Contracts: Enhanced programmability for automated payments in supply chains and government transfers.

Macro Implications

The move is seen as a significant step toward the internationalization of the RMB. By integrating the e-CNY into the core banking system, Beijing aims to increase its utility for large-scale cross-border settlements. The mBridge project, which utilizes the digital yuan for cross-border payments, has already processed over 380 billion yuan providing a working proof-of-concept for avoiding traditional SWIFT rails.