Deputy Governor of the PBC Explains in Detail How Digital RMB and Blockchain Integrate

Author | Lu Lei, Member of the CPC Committee and Deputy Governor of the People’s Bank of China (PBC)

Source: https://finance.sina.com.cn/roll/2025-12-29/doc-inhemqas8008548.shtml

The “Proposals of the Central Committee of the Communist Party of China on Formulating the Fifteenth Five-Year Plan for National Economic and Social Development,” deliberated and adopted at the Fourth Plenary Session of the 20th CPC Central Committee, proposed to “accelerate the building of a strong financial nation” and “steadily develop the digital RMB (e-CNY),” providing a guide for action for the development and improvement of the digital RMB in the coming period. Facing the development trends of economic and social digitalization and intelligence, and based on the summary of ten years of research, development, and pilot experience, the People’s Bank of China has issued the Action Plan for Further Strengthening the Digital RMB Management and Service System and Related Financial Infrastructure Construction (hereinafter referred to as the “Action Plan”). A new generation of digital RMB measurement framework, management system, operating mechanism, and ecosystem was officially launched and implemented on January 1, 2026.

I. Adhering to Advancing with the Times to Grasp the Positioning and Development Direction of Digital RMB

With the outbreak of the international financial crisis in 2008, digital assets, cryptocurrencies, and new payment tools emerged one after another. This is both an objective reflection of economic digitalization and intelligence in the financial field and has brought about a series of micro and macro financial risk challenges such as shadow banking and financial disintermediation. Facing the new situation, central banks of major economies and international organizations have begun the research and development of Central Bank Digital Currency (CBDC). In 2018, the Bank for International Settlements defined CBDC as “digital cash in a value/blockchain mode issued by the central bank.” The European Central Bank defined it as “a central bank liability offered in digital form to citizens and businesses for retail payments.” These economies and international organizations examine digital currency from the perspective of central bank responsibilities.

China’s research and development of digital RMB started early. In 2014, under the unified deployment of the CPC Central Committee and the State Council, the People’s Bank of China initiated theoretical research and closed-loop testing. In 2016, the People’s Bank of China proposed the theoretical framework for a statutory digital currency named Digital Currency Electronic Payment (DC/EP), prudently and scientifically exploring the management system and operating mechanism of the digital RMB (e-CNY) through steady pilot programs. After repeated demonstrations and open pilots, an ecosystem for digital RMB was preliminarily constructed, carving out a Chinese-style digital currency development path led by the central bank, relying on commercial financial institutions and the existing payment system, and integrating the latest technological progress.

Currently, the experimental promotion of domestic and cross-border digital RMB has achieved positive results, putting it in a leading position among CBDC projects tested by various central banks. First, it possesses universal hybrid currency capabilities: the e-CNY features both account-based and blockchain-based modes; it has both software and hardware wallets; and it supports both online and offline payments. Second, it possesses programmable currency capabilities: utilizing e-CNY smart contracts to achieve the digitalization and mandatory automatic execution of contracts. Third, it possesses high-efficiency supervisory currency capabilities: with strong management transparency, standardization, and interoperability. Fourth, it possesses full-scenario currency capabilities: forming replicable and promotable application models across fields such as wholesale/retail, catering/tourism, education/healthcare, public services, social governance, rural revitalization, and cross-border settlement, implementing multiple scenarios in support of the “Five Major Articles” of finance. As of the end of November 2025, the e-CNY has processed a cumulative total of 3.48 billion transactions, with a cumulative transaction volume of 16.7 trillion yuan. 230 million personal wallets have been opened via the e-CNY App, and 18.84 million corporate wallets have been opened. The mBridge project has processed a total of 4,047 cross-border payment transactions, with a cumulative volume equivalent to 387.2 billion yuan, of which the e-CNY accounted for approximately 95.3% of the transaction volume across all currencies.

At the same time, we clearly see that as the real demand for the development and application of digital currency in economy and society continues to rise, digital currencies promoted by central banks worldwide face four common theoretical and practical challenges.

First, we must correctly understand the challenges that rapidly iterating modern digital payment tools pose to central bank monetary regulation. From various virtual assets to current stablecoins, all appear in the form of payment tools. Objectively, this creates risks where various emerging “currencies” used as means of payment and circulation circulate within a self-contained loop outside the financial system, leading to the rapid expansion of payment tools in circulation and sharp fluctuations in the prices of linked financial assets. Achieving the advantages of low cost and high efficiency in digital payment means while ensuring effective macro-control and orderly market development is a practical requirement that central banks of all countries must face.

Second, we must correctly handle the challenges of digital currency development and financial “disintermediation” risks. Compared to broader money, cash features real-time payment, but outside the issuance and withdrawal stages, cash circulation operates independently of the financial system and does not require financial intermediaries to provide transaction services. In monetary and financial theory, the emergence of modern banking promoted the transformation of cash into deposits within the banking system, which then continuously creates deposit money through lending; this marked the transition of economy and society from the ancient “Currency” era to the modern “Money” era. Digital cash is the digital form of cash. The generation of digital cash wallets and the conversion of bank deposits into digital cash are equivalent to increasing cash supply, which reduces liquidity in the banking system and lowers the money multiplier. This is a practical impact that all digital payment methods operating outside the banking system have already brought and continue to bring.

Third, we must correctly handle the challenge of digital cash as a central bank liability versus commercial bank responsibilities. As a liability of the central bank to the public, digital cash theoretically does not require the participation of commercial banks or other financial institutions for operation and maintenance. However, in research and pilot programs, there is a clear difference in the rights and responsibilities between digital cash and physical banknotes in circulation. Commercial banks are indispensable operators for wallet opening, scenario development, and technical maintenance. Their services accompany the entire lifecycle of digital cash circulation. They bear direct responsibility for the security, reliability, continuity, and non-perishability of digital cash circulation, as well as for “Three Anti” (anti-money laundering, anti-terrorist financing, and anti-tax evasion) compliance, effectively becoming the responsible entities for digital cash. Establishing a scientific and reasonable symmetry between rights and responsibilities is an unavoidable issue in digital cash mechanism design.

Fourth, we must correctly handle the challenge of reconciling the “centralized” management of bank account compatibility with the “decentralized” characteristics of blockchain (Distributed Ledger Technology, DLT). In the practical operation of money as a means of payment, the advantage of accounts lies in protecting customer rights and ensuring standardization and compliance with regulatory requirements such as anti-money laundering and anti-fraud; the advantage of blockchain lies in reducing the cost of confirming rights and establishing trust. How to achieve the integration of both models is a pain point and difficulty in mechanism design.

In response to these practical challenges and adhering to a problem-oriented approach, based on the DC/EP theoretical prototype and through in-depth R&D and testing, the Action Plan clarifies institutionally that the digital RMB will transition from the digital cash era to the Digital Deposit Money era. The future digital RMB will be a modern digital means of payment and circulation that is technically supported and supervised by the central bank, possesses the attribute of commercial bank liabilities, is account-based while compatible with DLT characteristics, and is issued and circulated within the financial system. It will perform the functions of a unit of account, a store of value, and a means for cross-border payment.

II. Adhering to the Two-Tier Operating Architecture of “One Global Ledger”

Unlike the “decentralized” (currency issuance detached from the central bank) and “disintermediated” (currency circulation and transactions detached from licensed, regulated financial institutions, entering an external loop) technical routes popular in crypto assets, the Digital Currency Institute of the People’s Bank of China completed the first-generation prototype design (Cash-type e-CNY Version 1.0) and successfully pioneered the “Central Bank-Commercial Institution” two-tier operating system globally.

First, its legal and economic attributes are identical to existing bank deposits. Since the birth of the Sveriges Riksbank in 1668 and the Bank of England in 1694, the issuance and creation of money in the modern financial system has been a mature system under a “Central Bank-Commercial Bank” two-tier architecture. The issuance of base money by the central bank and the creation of money by commercial banks constitute an important fundamental institutional arrangement for currency singularity and the high-level integration of monetary finance with the needs of the real economy.

In 2016, China proposed the two-tier operating system for the digital RMB. Through ten years of practical testing, it has been widely recognized by central banks and international organizations worldwide, becoming a general standard for digital currency and a fundamental system for ensuring the internal circulation of the monetary system and safeguarding financial stability. The Action Plan further optimizes the “two-tier architecture” under the DC/EP theoretical framework. At the top-tier central bank level, the PBC is responsible for formulating business rules and technical standards, and for the planning, construction, and operation of related infrastructure. At the second-tier operating institution level, commercial banks open e-CNY wallets for individuals and entities through their own interfaces, take responsibility for the security of customers’ e-CNY, provide circulation and payment services, and bear corresponding compliance and AML responsibilities. These are included in the scope of deposit insurance, enjoying the same security guarantees as deposits. For non-bank payment institutions, the e-CNY provided to customers is exchanged by customers using their own bank deposits; this is a liability of the non-bank payment institution and is regulated as e-CNY reserves according to law.

Second, preventing financial disintermediation and shadow banking risks. While the application of digital technology significantly improves payment efficiency, it also brings risks of cash leakage, financial disintermediation, external circulation, and money laundering. To further clarify the symmetry between the responsibilities and rights of operating institutions, and after repeated verification, the Action Plan standardizes the e-CNY measurement framework. The e-CNY operations of bank-type operating institutions are integrated into the reserve requirement framework, and their opened e-CNY wallet balances are uniformly included in the base for calculating required reserves. Non-bank payment institutions participating in e-CNY operations must implement 100% e-CNY reserves. Wallet balances are categorized into corresponding monetary aggregates based on liquidity. This institutional arrangement, built upon the “two-tier architecture,” clarifies that e-CNY in commercial bank wallets is an account-based liability of the commercial bank, marking the transition of e-CNY from the cash-type Version 1.0 to the deposit money-type Version 2.0.

Third, fully leveraging the compatible incentives of cash payment advantages and bank account income advantages. Regarding the function of money as a means of payment, real-time settlement, anonymity, and offline payment are the irreplaceable advantages of cash in the digital economy era, which otherwise relies heavily on terminals, networks, and mobile internet. The Action Plan proposes to “comprehensively promote the construction of the e-CNY acceptance environment,” relying on efficient system design and “one global ledger” to achieve real-time settlement, comprehensively reducing the transaction costs associated with the separation of information flow and capital flow. Meanwhile, the interest-bearing capability of accounts relative to cash serves as an incentive for individuals and entities, and deposit money helps maintain liability stability as an incentive for commercial banks — factors that cannot be ignored in any monetary innovation. Within the “two-tier architecture,” the Action Plan clarifies: banking institutions shall pay interest on customers’ real-name e-CNY wallet balances, complying with self-regulatory conventions on deposit rate pricing. This arrangement, based on the principle of substance over form, establishes an initial framework for compatible incentives. Consequently, banks can independently conduct asset-liability management of e-CNY wallet balances, with deposit insurance providing the same level of security as for deposits. For non-bank payment institutions, e-CNY reserves are no different from customer reserve funds.

III. Adhering to the Integration of Account-Based Management Advantages and Blockchain Efficiency Advantages

Unlike the pure blockchain technology models explored by some international organizations and central banks, China’s digital RMB has, since 2016, followed a development route of “a hybrid architecture with both account and value (blockchain technology) characteristics,” always taking the monetary payment needs of the real economy as the starting and ending point. Currently, as crypto assets and stablecoins use the value-based model as their basic technical route, a popular judgment has formed that only the use of blockchain constitutes “true” digital currency. China’s pilots and practices prove that an account-based system, utilizing digital technologies such as smart contracts, can achieve lower-cost and higher-efficiency digital currency payment services. In massive retail and wholesale links, relying on accounts to implement digital technology maintains centralization and management effectiveness; in specific scenarios requiring enhanced trust, relying on blockchain for collaborative transactions maintains adaptability to new technologies and scenarios. This is a Chinese-style hybrid innovation achieved after prudent exploration, full demonstration, and meticulous testing. On the basis of accounts, the comprehensive use of digital technologies such as digital coin strings, smart contracts, and blockchain has moved the digital RMB from the era of electronic payment into the era of digital payment.

First, adhering to the promotion of digital currency and smart contract technology within the account system. The R&D and pilot of the digital RMB do not mean starting from scratch, but rather relying on the mature management advantages of bank accounts as the basic unit of payment. The Action Plan clarifies a digital solution of “Account System + Coin Strings + Smart Contracts.” It proposes to upgrade the existing account system, promote the application of emerging technologies on the basis of new accounts (e-CNY wallets), and enhance the level of digitalization and intelligence in all links of RMB issuance, circulation, and payment. It also aims to upgrade the e-CNY smart contract ecosystem service platform to support the construction of an open-source smart contract ecosystem. On one hand, accounts can be integrated into the existing banking business system, possessing advantages of standardization, compliance, identifiability, and strong interoperability. Combined with programmability and smart contracts, the e-CNY has unique advantages in precision and reach for expanding scenarios in the “Five Major Articles” of finance — such as innovative supply chain finance solutions, promoting the intelligent development of “carbon inclusion” systems, strengthening consumer protection in prepaid fund management, and serving smart elderly care scenarios. On the other hand, the regulatory transparency and multi-level fund management capabilities of coin strings and the e-CNY umbrella wallet system offer prospects for low-cost, high-efficiency application in closed-loop fields such as public utilities, medical and social insurance, corporate group treasury management, green energy trading, and treasury fund operations.

Second, utilizing new fintech means such as blockchain to support the “Five Major Articles” of finance and enhance cross-border payment efficiency. Among various digital means, blockchain technology possesses technical characteristics such as immutability, traceability, multi-source information sharing, and multi-party peer collaboration. It holds advantages in industry applications such as securities settlement, property rights transfer, transaction registration, and supply chain finance. It is expected to achieve the “integration of multiple flows” — logistics, capital flow, and document flow — in complex financial scenarios, reshaping trust-building mechanisms among multiple stakeholders.

The Action Plan proposes that the establishment of the Digital RMB International Operation Center in Shanghai and the further promotion of the mBridge project are both practical applications of blockchain technology at the digital RMB level. At the International Operation Center, a blockchain service platform and a digital asset platform have been built based on the “Chengfang Chain” foundation, achieving “Unified Ledger, Segmented Business.” It provides on-chain settlement tools and cross-chain transfer capabilities, explores compliant asset digitalization innovations conducive to see-through regulation, and supports the on-chain issuance, registration, custody, and settlement of bills, trade finance tools, and carbon emission rights. This gradually forms advantages such as 24/7 operation, single-point connection, diverse services, currency connectivity, and system connectivity. The mBridge project focuses on leveraging the DLT characteristics of blockchain to address “business sovereignty and monetary sovereignty” issues across jurisdictions. It effectively achieves parity in identity, power, responsibility, and interest among all participating entities, and realizes data synchronization across all participants. Moving forward, the cross-border use of e-CNY will continue to expand its access range and reduce service costs through technical iterations, facilitating cross-border trade and investment/financing, supporting offshore financial business innovation, and promoting high-level, institutional opening-up.

Looking ahead, the choice of business and technical models for the digital RMB will adhere to meeting the needs of the real economy as the fundamental starting point. It will adopt a principle of embracing both account-based and value-based digital currency development directions with prudent selection, driving the e-CNY to meet the needs of different scenarios and diverse market entities.

IV. Adhering to Building the “Breakwaters” and “Seawalls” for Digital RMB Development

To steadily develop the digital RMB, stability must come first, requiring the continuous improvement of the risk prevention and control safety net.

First, ensuring full coverage of functional regulation through the separation of management and operation. The Action Plan clarifies that at the “Management” level, the People’s Bank of China has established a Digital RMB Management Committee to coordinate relevant business lines and conduct functional regulation within their respective responsibilities, forming a synergy. A self-regulatory office has been established within the Digital Currency Institute to lead the formulation and implementation of self-regulatory standards for e-CNY operations and to guide participating institutions in establishing sound market incentive mechanisms. At the “Operation” level, the focus is on ensuring the security and continuity of system operations. Under the management of the Digital Currency Institute, the Digital RMB Operation Management Center and the Digital RMB International Operation Center are respectively responsible for the construction, operation, and security protection of the central bank-end e-CNY system and the cross-border business system, forming a “two-wing” structure supporting the domestic and international dual circulation. The separation of management and operation provides a mechanical guarantee for the digital RMB to be “controllable yet innovative.”

Second, advancing supervisory technology and capacity building in step with the times. Currently, AI and big data technologies are empowering a new generation of financial regulatory technology. Through the global governance of e-CNY system data, the quality of business data can be effectively improved. By using “head-to-head” regulatory data interfaces and adding regulatory nodes on the blockchain service platform, the real-time nature and effectiveness of data acquisition for regulatory departments can be enhanced, achieving flexible, efficient, and intelligent risk identification. Closely monitoring the development trends of new technologies such as post-quantum cryptography, computing power, and smart contracts, the system will undergo continuous updates and iterations. Supported by autonomous, controllable, safe, and reliable infrastructure, this will effectively prevent financial risks and maintain financial stability.

Standing at a new starting point and rooted in the “two-tier architecture,” the digital RMB will always adhere to integrity and innovation. It takes serving the real economy as its fundamental purpose, prevents and controls risks powerfully and effectively, and scientifically and steadily promotes the transition from digital cash and electronic payment toward digital currency and digital payment. It strives to inject technological and contemporary momentum into the realization of a “strong currency,” consolidating the modern monetary foundation for building a strong financial nation.

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