China upgrades digital yuan infrastructure and monetary classification

At the Beijing Financial Street Forum, the People's Bank of China announced a major upgrade to the digital yuan (e-CNY) technical architecture and operating system. Key developments include the launch of the Digital Currency and Electronic Payment System (DCEPS) and a new smart contract service architecture designed to enhance cross-border settlements and liquidity management.

A significant structural shift occurred on January 1, 2025, when the monetary classification of digital yuan in commercial bank real-name wallets transitioned from M0 (cash) to M1/M2 (deposits). This change allows real-name wallets to earn interest, similar to traditional demand deposits, and provides coverage under deposit insurance. This new framework aims to incentivize commercial banks to participate by allowing them to manage these assets on their own balance sheets.

The system now offers a tiered approach: anonymous wallets remain available for small-scale, non-interest-bearing transactions to mimic cash, while real-name wallets provide interest-bearing deposit services. On the international front, the Cross-border e-CNY Transfer Services (CBETS) platform has been upgraded, with the Digital Yuan International Operation Center beginning operations in Shanghai to facilitate global transactions.