"Digital deposit currency" can earn interest. What other changes are there in Digital RMB 2.0?

Written by: Sanqing, Foresight News

December 29, 2023, Vice Governor of the People’s Bank of China, Lu Lei, wrote in the Financial Times titled “Upholding Innovation and Steady Development of Digital RMB,” providing detailed information about the “Action Plan for Further Strengthening the Digital Renminbi Management and Service System and Related Financial Infrastructure Construction” (hereinafter referred to as the “Action Plan”). The new generation of digital RMB measurement framework, management system, operational mechanism, and ecological system will be officially launched on January 1, 2026.

The article points out that among the projects promoted by central banks worldwide, digital RMB is in a leading position, possessing capabilities of a general-purpose hybrid, programmable, highly regulated, and all-scenario currency. Digital RMB is not only a payment tool but also the modern monetary foundation for building a “strong financial nation.”

Additionally, the article suggests that emerging “currencies” like stablecoins, and crypto assets that are detached from central bank currency issuance and the circulation and trading of licensed and regulated financial institutions, tend to circulate independently outside the financial system, leading to sharp fluctuations in financial asset prices and challenging the macro-control capabilities of central banks.

From “non-interest-bearing cash” to “interest-bearing deposits”

During the decade-long research and pilot phase of digital RMB, its positioning has always been as a circulating currency (M0), i.e., “digital cash.”

Digital RMB is mainly used in small retail payment scenarios, with wallet balances not accruing interest. This feature somewhat limits users’ enthusiasm for holding and using it. The most intuitive transformation brought by Digital RMB 2.0 is the addition of an “interest payment” function.

According to the “Action Plan,” banking institutions will pay interest on the real-name digital RMB wallet balances of their customers, and this interest rate will adhere to the self-regulatory agreement on deposit rate pricing. This design breaks the previous boundary where pure M0 could not earn interest, and digital RMB wallet balances will be classified into appropriate monetary tiers based on liquidity.

From policy-driven promotion by banks to inclusion in the “bank liabilities” system

The ability of digital RMB to pay interest signifies a deeper transformation in its liability attributes. The “Action Plan” will incorporate digital currency held by banking institutions into the reserve requirement management framework, with balances included in the deposit reserve deposit base.

The new generation of digital RMB clarifies that its position in commercial bank wallets is as a liability of commercial banks, rather than solely a liability of the central bank as before. Banks can also independently manage assets and liabilities related to wallet balances.

This means that digital currency is officially included in the deposit insurance coverage, with a maximum compensation of 500,000 RMB, providing the same safety level as traditional bank deposits. Banks can also use digital currency balances to issue loans and profit from them, rather than just acting as an agent for the central bank.

From prepayment regulation to a programmable “umbrella wallet” ecosystem

The “Action Plan” clearly defines the hybrid “Account System + Token String + Smart Contracts” scheme for Digital RMB 2.0. It proposes upgrading the existing account system, promoting the application of emerging technologies on the new type of accounts (digital RMB wallets), and enhancing the digitalization and intelligence of the issuance, circulation, and payment processes of RMB. It also aims to upgrade the digital RMB smart contract ecosystem service platform and support the construction of an open-source smart contract ecosystem.

The account system relies on banks to address regulatory needs such as identity verification and anti-money laundering; the token string is a form of digital RMB that completes payments through the delivery of token strings and transfers ownership; smart contracts are responsible for automatically directing the transfer of token strings between accounts when specific conditions are met.

On September 8, 2022, the People’s Bank of China Digital Currency Research Institute released the first digital RMB smart contract prepayment fund management product—“Yuan Butler,” which combines commercial contract terms with digital RMB circulation.

According to the 2024 annual report from Postal Savings Bank of China, one of the digital RMB operation agencies, by the end of the reporting period, 551 merchants had adopted “Yuan Butler.” As reported by Beijing Business Daily on March 14, 2025, over 1,300 merchants issued “Yuan Butler” prepaid consumption cards covering sectors such as education and training, fitness, beauty and hairdressing, shopping supermarkets, and dining.

Image: From left to right, Meituan, Spring Airlines, Digital RMB application interface

Funds always belong to consumers before actual consumption. Only after the smart contract confirms that the service has been completed will the funds automatically transfer to the merchant, technically preventing the risk of misappropriation or merchants “running off with the money.”

According to Yicai on July 24, 2024, after the closure of the large chain fitness brand “Wu Bai You Pin Fitness” in Qingdao due to abnormal operations, 51 consumers who purchased cards through Postal Savings Bank’s “Zhijin Weishi” platform received refunds via automatic trigger of smart contracts on July 5.

mBridge Protocol and International Operation Center

In cross-border payments, Digital RMB 2.0 is more about resisting the impact of private stablecoins and attempting to maintain the control over the base currency through institutional defenses.

According to the “Action Plan,” mBridge (Multilateral Central Bank Digital Currency Bridge) uses distributed ledger technology (DLT) to build a peer-to-peer settlement layer, focusing on balancing the monetary sovereignty of various countries.

Although the total transaction volume has reached 387.2 billion yuan, with a high proportion of 95.3% in digital RMB, this objectively reflects that the liquidity of the system still heavily depends on Chinese nodes and has not yet formed a truly multilateral international ecosystem.

The Shanghai Digital RMB International Operation Center, scheduled to launch in 2026, will be based on the Chengfang Chain platform, implementing a “Unified Ledger, Business Domain Separation” model. Its design goal is to enable atomic transactions of assets (such as bills, trade financing instruments, carbon emission rights) and settlement tools (e-CNY) within the same ledger. This Chengfang Chain platform resembles a permissioned, compliant Layer 0, replacing the game mechanism of Web3 bridges by adding regulatory nodes and utilizing real-time data to identify risks.

Digital RMB 2.0 vs Stablecoins and Crypto Assets

In the Web3 ecosystem, the core narrative of stablecoins and crypto assets is built on “permissionless,” “trustless,” and “decentralized” principles. Stablecoins are usually issued by private institutions, backed by short-term government bonds or fiat currency, with a 1:1 redemption promise.

The expansion of stablecoins fundamentally depends on the issuer’s asset allocation ability, custody transparency, and market trust. While this model shifts the creation, circulation, and risk-bearing of currency outside traditional financial systems, it does not rely on a single national account system, making it inherently global and highly liquid.

In scenarios such as cross-border payments, on-chain transactions, and fund transfers, stablecoins provide nearly instant and low-friction settlement experiences. As a common collateral, stablecoins are highly composable, enabling rapid iteration of on-chain financial products, which is a significant efficiency advantage over other systems.

Unlike the off-system circulation of bank systems with stablecoins, digital RMB in phase 1.0 is more akin to an electronic extension of paper cash. The design of phase 2.0 is based on a complete institutional framework, maintaining a “central bank + commercial bank” dual-layer operation system, using a “Account System + Token String + Smart Contracts” hybrid model.

Under this framework, digital RMB centers on accounts for identity recognition, anti-money laundering, and reserve management, while blockchain and other technologies are introduced at specific points to improve clearing efficiency.

The goal of this design is to prevent digital currency from independently inflating outside the financial system, thereby weakening the central bank’s ability to regulate money supply, liquidity, and financial stability.

The essence of Digital RMB 2.0 is equivalent to bank deposits. The “Action Plan” explicitly includes digital RMB in the bank liability system, with real-name wallet balances included in the deposit reserve base. Digital RMB in commercial bank wallets is legally and economically equivalent to deposits.

Through reserve management, 100% guarantee arrangements for non-bank institutions, and classification into monetary tiers based on liquidity, digital RMB is re-integrated into the modern banking system cycle.