China’s Digital Yuan Takes New Step With Interest Payments and Green Finance Push
China’s digital yuan has entered a new phase of development, with authorities allowing the central bank digital currency to pay interest and support environmentally focused financial initiatives, a move experts say signals growing confidence rather than weakness in the system.
The digital yuan, also known as eCNY, has often been portrayed by some commentators as struggling to gain traction. However, recent data and policy adjustments suggest the opposite. By late two thousand twenty five, the e CNY had processed more than three point four billion transactions with a combined value of roughly two point three trillion US dollars, representing growth of more than eight hundred percent since two thousand twenty three. These figures point to rapid expansion and increasing real world use across China’s economy.
Richard Turrin, a former banker and author specialising in Chinese financial innovation, argues that the latest changes show maturity in China’s approach to digital money. According to Turrin, China has accumulated more hands on experience operating a central bank digital currency than any other country, giving policymakers a clearer understanding of how digital money interacts with banks, businesses, and consumers.
At the centre of the latest update is the introduction of interest bearing, or remunerated, digital yuan. Earlier versions of the eCNY were treated as a direct equivalent of physical cash, known as M0, meaning banks could distribute it but could not use it in their traditional role of credit creation. This limited its appeal for both commercial and retail lending and reduced incentives for wider adoption.
Allowing banks to pay interest on digital yuan holdings changes that dynamic. It enables financial institutions to integrate the eeCNYmore fully into deposit, lending, nd payment systems, aligning digital currency with the core mechanics of modern banking. Chinese banks have grown increasingly comfortable that the digital yuan will not drain their deposit base, and policymakers now see them as essential partners rather than competitors in expanding usage.
The People’s Bank of China has gradually refined its strategy as the project evolved. Officials have concluded that a central bank cannot roll out a widely used digital currency in isolation. Banks remain the primary channels through which money circulates and credit is created, whether in digital or traditional form. By giving banks a clearer role in the digital yuan ecosystem, authorities aim to accelerate adoption while maintaining financial stability.
The latest iteration of the eCNY also incorporates green finance elements. Transactions linked to low carbon projects, energy efficiency, and sustainable supply chains can be tracked more precisely, supporting China’s broader climate and emissions goals. Policymakers see digital currency as a tool that can improve transparency and efficiency in green funding, helping ensure capital is used as intended.
Turrin dismisses comparisons between the digital yuan and interest paying US dollar stablecoins as misleading. He argues that stablecoins and central bank digital currencies serve fundamentally different purposes. While stablecoins are private instruments designed primarily for trading and settlement, the eCNY is a sovereign currency embedded within China’s regulated financial system.
Far from threatening US stablecoins, the digital yuan is designed mainly for domestic payments and financial integration. Its evolution reflects China’s pragmatic approach to innovation, testing features in stages, learning from real world usage, and adjusting policy accordingly.
With interest payments and green finance integration now in place, the digital yuan appears less like an experiment and more like a permanent fixture of China’s financial architecture. For Beijing, the focus is no longer on proving the concept works, but on refining how digital money fits into everyday economic life.
