China’s PBOC Issues ‘Action Plan’ to Strengthen Digital Yuan Starting January 2026

The People’s Bank of China has issued an “Action Plan” to enhance the management and financial infrastructure of digital yuan.The new generation central bank digital currency (CBDC) framework, management and operational mechanism will be officially launched on January 1, 2026, a on Monday.Lu Lei, Deputy Governor of the PBOC, outlined the attributes of the modern digital yuan, including its issuance and circulation within the financial system. He stressed that technical support and supervision will be provided by the central bank.It will have “the functions of a measure of monetary value, store of value, and cross-border payment,” he added. The focus on the CBDC comes after a decade of development and testing.“In 2016, China proposed a two-tier operating system for the digital yuan. After ten years of practical testing, it has gained widespread recognition from central banks and international organizations worldwide, becoming a universal standard for digital currencies and a fundamental system for ensuring the internal circulation of the monetary system and safeguarding financial stability.” Commercial Banks to Pay Interest to Customers Based on Crypto BalancesFurther, Lu Lei rolled out a “two-tier architecture” within the action plan, which clarifies that banking institutions having digital yuan wallets will pay interest to clients based on the amount of digital asset they hold.“This arrangement forms a compatible incentive arrangement,” he said, adding that banks can independently manage the assets and liabilities of their digital yuan wallet balances.The move comes months after China established a new digital yuan operations center in the nation’s financial hub, Shanghai. The establishment will focus on three major platforms, including a cross-border payment rail, blockchain services and a crypto platform.Additionally, at the management level, the action plan noted that the PBOC will establish a Digital RMB Management Committee to coordinate business lines and conduct supervision within responsibilities.China’s Digital Yuan Recoup Plan After SetbacksThe nation witnessed setbacks after its multilateral cross-border payment platform, dubbed mBridge, faced shutdown talks. A year ago, the Bank for International Settlements (BIS) following concerns that the underlying technology could be a tool to circumvent sanctions and potentially undermine the dollar’s dominance in the global financial system.Besides, despite an ambitious CBDC rollout in 2019, user reluctance and competition from entrenched mobile payment systems continue to impede its progress.Charles Chang, director of the Fintech Research Centre at Fudan University, explained that “the digital yuan is facing some bottlenecks in adoption today.”