China to Pay Interest on Digital Yuan as US Weighs Stablecoin Reward Limits

China will start paying interest on balances held in its central bank digital currency (digital yuan / e-CNY) from Jan. 1, 2026, with six major state-owned banks calculating and distributing interest at each bank’s demand-deposit rate. The People’s Bank of China (PBOC) reports the e-CNY system processed 3.48 billion transactions worth 16.7 trillion yuan through November and frames interest as an adoption incentive versus private payment platforms (Alipay, WeChat Pay). The policy reclassifies e-CNY from digital cash toward a deposit-like instrument, integrating it with bank balance sheets, deposit insurance, and broader banking services; anonymous class-4 wallets remain non-interest-bearing. The move is read both as domestic payment modernisation and a geopolitical step to strengthen the yuan’s store-of-value appeal and cross-border use cases. The announcement coincides with active US policy debate over whether stablecoin issuers can offer rewards or interest (notably bills reviewed by the Senate Banking Committee and proposals like the GENIUS Act). Industry voices — including Coinbase executives — warn that restricting rewards on US-issued stablecoins would weaken dollar competitiveness against interest-bearing CBDCs, while some banks worry interest-bearing stablecoins could pressure deposit margins. For traders: expect possible shifts in payment flows, incremental demand for e-CNY as a low-yield store-of-value, and renewed attention on regulatory outcomes in the US that could alter stablecoin yield products. Primary keywords: digital yuan, e-CNY, CBDC interest, stablecoin rewards, People’s Bank of China.