The retail digital yuan is no longer a central bank digital currency. China’s version 2.0 upgrade, launched on 1 January 2026, has transformed it into a commercial bank deposit solution in which retail balances become liabilities of the holding institution, whether a bank or non-bank payment provider. Banks can now use these deposits for fractional reserve banking, with balances protected by deposit insurance; non-bank providers must hold full reserves.
The pivot positions the approach as a more financially stable alternative to stablecoins. Major state-owned banks and others have announced that they now pay interest on digital RMB deposits at the same rate as existing demand deposits, with many banks offering around 0.05%.
In an article in the Financial News, the deputy governor of the People’s Bank of China, Lu Lei, outlined that this approach addresses stablecoin risks. Ledger Insights anticipated this direction after remarks by Mu Changchun, the leader of the Digital Currency Research Institute at the People’s Bank of China, in September 2025, and the latest announcement provides the first official confirmation of the transformation.
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