While Wall Street is still debating, Digital RMB has already started "giving money" to users.

Author: Nancy, PANews

Historically, in the battle for customer acquisition in finance, “giving users a share of the profits” has always been the simplest and most effective weapon.

More than a decade ago, Yu’ebao used visible and easily calculable yields to break through the cognitive boundaries of ordinary people regarding financial products and launched a positive impact on traditional finance.

Similar games are now replaying across the ocean. Recently, Wall Street elites and crypto-native giants have been fiercely debating the market structure legislation concerning stablecoin yields. One side attempts to safeguard the high walls of traditional finance through regulation, while the other fights to seize market share with real money.

Turning our gaze back to China, the digital renminbi is undergoing a critical upgrade. As is well known, over the years of pilot programs, red envelope incentives, scene promotion, and policy pushes have been repeatedly implemented, yet the digital renminbi has remained elusive for ordinary households.

With the launch of Digital RMB 2.0 this year, it has gained the ability to generate interest, providing users with a direct and tangible demand: earning interest on holdings. Meanwhile, the digital renminbi has also transitioned from M0 to M1, planning a longer-term path through smart contracts, becoming the underlying infrastructure for digital payments.

Entering the era of interest generation, upgraded to “interest-bearing stablecoin”

In terms of scale alone, the promotion of digital renminbi has not been slow.

After ten years of research, exploration, and pilot promotion, it has reached a certain volume. As of the end of November 2025, a total of 3.48 billion transactions were processed, amounting to 16.7 trillion yuan; 230 million personal wallets and 18.84 million institutional wallets have been opened, with pilot coverage across 17 provinces (regions, cities) and 26 areas.

From infrastructure building, technical validation, to payment scene implementation, digital renminbi has achieved the phased goal of moving from usable to usable. This progress benefits from continuous improvement of underlying technology and strong policy support, such as red envelope subsidies and consumption cashback, continuously creating usage opportunities for digital renminbi.

But in daily life, is digital renminbi really common? The answer is not optimistic.

When placed within the larger payment system, the contrast is especially stark. In Q3 2025 alone, non-bank Chinese payment institutions processed online payment transactions totaling 85.28 trillion yuan, with 338.019 billion transactions. Not to mention, commercial payment networks built by Alipay, WeChat Pay, and others have long penetrated high-frequency scenarios like clothing, food, housing, and transportation. In terms of transaction scale, user stickiness, and capital accumulation, they far surpass what digital renminbi can currently match.

For most ordinary users and businesses, digital renminbi is merely a different guise of the same currency—funds sitting in accounts without earning interest. It is essentially no different from the balances in WeChat or Alipay wallets, so users naturally lack motivation to change their long-standing habits.

This situation finally saw a turning point on January 1, 2026, when digital renminbi was officially upgraded to an “interest-bearing stablecoin.”

According to the latest policy, users can download the digital renminbi app from official app stores and, within first-class, second-class, and third-class real-name wallets, have their funds accrue interest based on the prevailing savings deposit rate. The current annual interest rate is 0.05%. Interest is paid on settlement dates: March 20, June 20, September 20, and December 20. It is important to note that anonymous wallets (fourth-class wallets), opened solely via mobile phone number verification, do not accrue interest.

This means that short-term idle funds now have a channel for appreciation, with automatic interest accrual and zero operational effort. Although this rate is not high, it provides users with a reason to retain funds and gives digital renminbi a competitive edge over traditional financial products.

In the crypto world, stablecoin yields are no longer new, often achieved through DeFi, staking, or shadow interest rates. However, these mechanisms also come with challenges such as smart contract vulnerabilities, de-pegging risks, and regulatory uncertainties.

In contrast, the yield of digital renminbi is built within a safe and controllable framework under central bank regulation, ensuring the stability and security of funds. Digital renminbi is covered by deposit insurance, enjoying the same safety protections as ordinary deposits, with a maximum payout limit of 500,000 yuan. This state-backed safety net is fundamentally different from the code and consensus mechanisms relied upon in the crypto world.

With the further upgrade of digital renminbi, China has become the first economy globally to implement interest accrual on central bank digital currency.

Moving away from 100% reserve requirements, banks finally have motivation

Besides the lack of enthusiasm from users, the participation and motivation of banks have also been major hurdles in promoting digital renminbi.

Initially, digital renminbi was positioned as M0 (digital cash). This design limited its application scenarios and did not offer any yield to users. More importantly, it adopted a 100% reserve system. This meant that commercial banks could not utilize the digital renminbi deposited by users for lending or investment; every digital renminbi received had to be fully remitted to the central bank and frozen in the central bank’s account.

As a result, banks could neither generate returns from these funds nor cover operational costs such as wallet setup, scene expansion, anti-money laundering, and customer service. Therefore, banks lacked sufficient motivation to actively promote digital renminbi.

“Traditional account systems have little room for innovation. After M1, digital renminbi is becoming a financial infrastructure, providing market institutions more space for exploration,” according to a banking insider cited by Caixin.

As digital renminbi gradually evolves into the M1 form, the situation has changed.

In the new M1 model, the digital renminbi balance in banks’ real-name wallets becomes a liability for commercial banks. Banks only need to deposit a portion of these funds into the central bank according to the statutory reserve ratio, while the remaining funds can be used to develop value-added services, such as launching exclusive digital renminbi financial products.

This institutional adjustment provides banks with more profit opportunities, incentivizing their active participation in building the digital renminbi ecosystem. It also shifts banks from cost centers to profit centers, strengthening their motivation to promote digital renminbi.

Currently, major banks such as ICBC, ABC, BOC, CCB, Bank of Communications, Postal Savings Bank of China, and China Merchants Bank all offer digital wallet services.

It should be noted that non-bank payment institutions (like Alipay and WeChat Pay) still need to maintain 100% reserve requirements and do not enjoy the more flexible fund operation space that banks do.

Removing the payment label, smart contracts become new infrastructure for finance

Digital renminbi is gradually shedding the “payment substitute” label and transforming into a more sticky digital financial infrastructure.

Unlike WeChat and Alipay, which essentially serve as payment tools storing traditional currency, digital renminbi itself is a currency, used like electronic cash. Moreover, digital renminbi is not built on blockchain but on a newly designed account system. However, the programmability enabled by smart contracts is its core competitive advantage, allowing it to embed more complex fulfillment and regulatory scenarios.

For example, in the prepaid field, digital renminbi can realize a “partial unfreeze and pay-by-installment” fund management mode; in family and campus scenarios, parents can restrict their children’s accounts to specific spending ranges; in government subsidy scenarios, the use of funds can be precisely controlled.

In terms of technical implementation, according to Caixin, digital renminbi uses a restricted Turing-complete design, supporting only templates of scripts authorized by the central bank. While this design limits some functionalities, it effectively ensures system security and controllability. Compared to fully Turing-complete smart contracts in the crypto world, this design avoids common risks such as vulnerabilities, attacks, and governance failures. Notably, digital renminbi smart contracts support multiple programming languages, including Solidity compatible with Ethereum, which is fully Turing-complete, so development potential is not limited.

Furthermore, digital renminbi demonstrates payment resilience. Its dual offline payment feature allows both parties to complete transactions via NFC in close proximity without network connectivity. This capability is indispensable in emergency scenarios and special environments. In contrast, in the crypto sphere, whether Bitcoin or stablecoins, almost all rely on continuous network connectivity for ledger synchronization and final settlement.

To bridge the “digital divide” and accommodate the usage habits of seniors, students, and overseas Chinese, digital renminbi also offers various hardware wallet forms, including IC cards, wearable devices (like watches), SIM cards, and mobile terminals. This is quite different from crypto hardware wallets mainly used for “cold storage” of private keys to prevent hacking. Digital renminbi hardware wallets focus more on inclusive high-frequency payments. However, due to current costs and willingness of merchants to upgrade acceptance terminals, the actual usage scope of digital renminbi hardware wallets remains limited, and its widespread adoption still requires further observation.

Currently, digital renminbi is accelerating its evolution into a full-scenario currency. Its applications have extended beyond retail, covering wholesale payments, public services, social governance, and cross-border settlements, forming scalable, replicable online-offline application models. It is expected to further become an indispensable infrastructure in the digital economy.

Particularly in cross-border payments, its upgraded direction supports three-tier transfers among countries, merchants/individuals. As stablecoins rapidly penetrate the global cross-border payment space, digital renminbi is accelerating its “going global,” becoming a key driver of RMB internationalization. Through cross-border payments, digital renminbi can improve payment efficiency, reduce costs, and secure a position in the global payment system. For example, overseas tourists in China can pay in their local currency via digital renminbi app scans at real-time exchange rates without currency exchange. Currently, cross-border transfers via mBridge have exceeded $55 billion, with 95% settled in digital renminbi.

In summary, for digital renminbi to truly transition from a policy tool to a mass-market product, the real test may just be beginning. But its path and potential are now clearer than ever.