Digital Renminbi tops Baidu trending searches! Instant interest rate revolutionizes traditional payment systems

On January 3rd, “Digital Renminbi” topped Baidu’s hot search list. The core change is that starting January 1st, the Digital Renminbi wallet balance will accrue interest, upgrading from “Digital Cash 1.0” to “Digital Deposit Money 2.0,” becoming the world’s first interest-bearing CBDC, disrupting China’s traditional payment system.

Digital Renminbi is money itself; traditional payments are just wallets

Baidu’s hot search analysis points out that the fundamental difference between Digital Renminbi and traditional electronic wallets lies in: Digital Renminbi is money, equivalent to holding electronic cash directly paid to merchants; traditional payments are wallets, where money is transferred from a linked bank account to pay merchants. This seemingly simple distinction actually reveals the fundamental differences in currency level, credit basis, and regulatory attributes.

Digital Renminbi belongs to M0 (cash in circulation), issued by the People’s Bank of China, and has the highest credit rating. When you hold Digital Renminbi, it is an asset directly backed by national sovereignty credit, independent of any commercial institution. Even if the issuing bank fails, your Digital Renminbi remains valid and protected by deposit insurance. This credit structure is identical to physical banknotes, only the medium shifts from physical to digital.

Traditional payments are merely payment tools, essentially digital interfaces of commercial bank accounts. When you use traditional payments, funds transfer from your linked bank account to the merchant’s bank account, with the platform only providing information transmission services. In this mode, your funds’ safety depends on both commercial banks and payment platforms’ credit. If banks or platforms encounter issues, funds may face risks.

The interest policy further widens this gap. From January 1, 2026, the Digital Renminbi wallet balance will accrue interest based on a demand deposit, making holding Digital Renminbi not only safe but also generating passive income. In contrast, balances in traditional payments do not accrue interest (unless transferred to money market funds like Yu’ebao), and these funds’ yields come from commercial bank deposits, with higher risk levels than sovereign credit.

Global innovation: Central bank digital currency incentive model breakthrough

Over 130 monetary authorities worldwide are exploring CBDC, but they generally face an unresolved paradox: how to prevent digital currency issuance from undermining the traditional banking system while launching it? Concerns that the central bank directly providing safe and convenient digital fiat currency to the public could lead to a loss of commercial bank deposits and impact credit creation.

Therefore, the European Central Bank has set holding limits for the digital euro, and the Bank of Japan explicitly limits CBDC to non-interest-bearing digital cash. The underlying logic of these measures is defensive. This conservative design results in CBDC’s slow adoption due to lack of incentives for users and banks, leading to a divergence between function and goal. The Bahamas’ Sand Dollar and Nigeria’s eNaira have very low usage, exemplifying this dilemma.

Digital Renminbi 2.0 reconstructs the monetary debt relationship through institutional innovation, solving this global challenge. Its innovation lies in transforming Digital Renminbi from a liability of the central bank into a legal currency with commercial bank liability attributes. Commercial banks have management and yield rights over Digital Renminbi deposits, shifting their motivation from “passive compliance” to “active operation,” forming a sustainable market-driven promotion mechanism.

Three-tier incentive structure reshaping promotion momentum

User-side incentives: Interest accrual elevates Digital Renminbi from a simple payment tool to a wealth management tool, encouraging users to deposit more funds into Digital Renminbi wallets rather than only transferring during payments. This increased retention rate is key to successful promotion.

Bank-side incentives: Commercial banks can use the absorbed Digital Renminbi deposits for credit creation, earning interest margin. This alleviates banks’ fears of CBDC “stealing deposits,” instead viewing it as a new liability source, actively promoting it as a benefit.

Central bank tools: The interest rate on Digital Renminbi becomes a new policy variable that can be directly adjusted, allowing the central bank to implement precise structural monetary policy through interest rate adjustments. Its traceability also provides unprecedented data support for regulation.

This tripartite incentive-compatible design is the core innovation of Digital Renminbi 2.0, offering a new path for other countries’ CBDC exploration.

Strategic empowerment of Hong Kong’s digital financial center

The key variable of interest payment has fundamentally changed the nature of Digital Renminbi in cross-border and financial scenarios, transforming it from a “payment channel” into a “strategic asset,” providing substantial support for Hong Kong’s development as an “International Digital Asset Hub.”

First, interest payment addresses the motivation for cross-border capital retention. In the cross-border payment network of the multilateral central bank digital currency bridge (mBridge), non-interest-bearing digital currency is only a circulation medium, motivating enterprises to settle quickly to reduce capital occupation costs. After interest payment, Digital Renminbi gains attributes comparable to offshore RMB deposits in Hong Kong, enabling multinational corporate treasury centers to use it as an interest-earning liquidity management tool. Currently, Digital Renminbi accounts for over 95% of transactions on mBridge, and the interest policy is expected to turn traffic advantages into stock advantages.

Second, interest payment enhances the credit appeal of Digital Renminbi as a tokenized settlement currency. Hong Kong Monetary Authority’s Ensemble project has explored tokenized deposit interoperability, and Digital Renminbi 2.0 can serve as a higher-level settlement asset integrated into this ecosystem. Leveraging Digital Renminbi’s programmability, automatic execution of bond coupon payments or trade finance conditions can greatly improve efficiency.

Third, interest payment deepens the differentiated synergy between Digital Renminbi and Hong Kong’s “Digital Hong Kong Dollar.” Hong Kong prioritizes developing a wholesale Digital Hong Kong Dollar for large transactions among financial institutions; interest-bearing Digital Renminbi serves cross-border retail payments and trade settlement. The two form a complementary pattern, enabling Hong Kong to simultaneously implement local financial infrastructure and cross-border bridge functions.