What impact does interest-bearing digital RMB have on Hong Kong's digital finance?

Jason Jiang｜Web3.01

By the end of 2025, the People's Bank of China will issue the "Action Plan for Further Strengthening the Management and Service System of Digital Renminbi and Related Financial Infrastructure," marking the official transition of digital renminbi from the "Digital Cash 1.0" era to the "Digital Deposit Currency 2.0" era.

The core change is that starting from January 1, 2026, the balance in digital renminbi wallets will begin to accrue interest, and its legal attribute will shift from a direct liability of the central bank to a legal currency with the attributes of commercial bank liabilities.

Common Dilemmas of Global CBDCs and the Breakthrough of Digital Renminbi

Over 130 monetary authorities worldwide are exploring CBDC practices, generally falling into an irreconcilable paradox: how to launch digital currency while preventing it from undermining the foundation of the traditional banking system? The root cause lies in the vigilance against financial disintermediation—concerns that the central bank's direct provision of secure and convenient digital fiat currency to the public will lead to a loss of deposits in commercial banks, impacting their credit creation function.

Therefore, whether it is the European Central Bank's discussion on setting limits for holding digital euros or the explicit warnings from the Bank of Japan, the underlying logic is defensive. They strictly limit retail CBDCs to non-interest-bearing digital cash (M0), reducing their attractiveness to bank deposits to ensure financial stability. However, this often leads to a lack of user and bank-side incentives for CBDCs, resulting in difficulties in promotion and a divergence from their intended functions and goals.

On this basis, the digital renminbi will become the world's first CBDC that pays interest on wallet balances for ordinary users. Digital Renminbi 2.0 reconstructs the monetary creditor-debtor relationship through institutional innovation, attempting to mitigate risks within the banking system and create new momentum. Its distinction from other global retail CBDCs lies in:

This model transforms the digital renminbi from a potential "external circulation" tool that could impact banks into "internal blood" deeply integrated into the bank's balance sheet.

Commercial banks have management and income rights over digital renminbi deposits, shifting their motivation from "passive compliance" to "active operation," forming a sustainable market-oriented promotion mechanism. At the same time, clear deposit insurance guarantees eliminate credit concerns on the user side.

This not only addresses the incentive issue but also means that the digital renminbi is officially incorporated into the traditional monetary creation and regulation framework, providing the central bank with a new policy variable (digital renminbi interest rate) that can be directly applied, while its traceability creates conditions for implementing precise structural monetary policies.

Defining a New Form: The "Hybrid" of CBDC and Tokenized Deposits

Digital Renminbi 2.0, due to its interest-bearing and bank-operated characteristics, is somewhat similar to tokenized deposits promoted by commercial banks. The latter are digital certificates of bank deposits on the blockchain (such as JPM Coin by JPMorgan), aimed at enhancing inter-institutional settlement efficiency. However, this similarity is merely superficial; the two differ fundamentally in their credit foundations and strategic levels.

Digital Renminbi 2.0 actually creates a new hybrid form: it absorbs the efficiency appearance of tokenized deposits, but its core is the complete credit of a sovereign currency.

This distinction is crucial. The credit of tokenized deposits is deeply tied to the balance sheet of the issuing bank, essentially optimizing the efficiency tools of existing financial intermediaries. In contrast, the credit foundation of Digital Renminbi 2.0 remains the sovereign state, aiming to build foundational financial infrastructure that supports the future digital economy.

A report from Tsinghua University's Financial Technology Research Institute also points out that this state-backed, programmable digital currency provides a core pivot for constructing a "blockchain + digital asset" dual-platform model.

Therefore, the upgrade of Digital Renminbi 2.0 goes far beyond the evolution of payment tools; it lays a "settlement track" with the highest credit rating in advance for the upcoming era of large-scale asset tokenization.

The Empowerment of Interest-Bearing Digital Renminbi on Hong Kong's Digital Financial Ecosystem

The strategic elevation of digital renminbi has a particularly direct and profound impact on Hong Kong, which is unique in its geopolitical and institutional context.

The key variable of interest-bearing fundamentally changes the nature of digital renminbi in cross-border and financial scenarios, evolving it from a "payment channel" to a "strategic asset," thereby providing substantial empowerment for Hong Kong to build an "international digital asset center" on multiple levels.

First, interest-bearing resolves the motivation issue of cross-border fund retention, directly strengthening Hong Kong's offshore renminbi fund pool function.

In the cross-border payment network based on the Multilateral Central Bank Digital Currency Bridge (mBridge), non-interest-bearing digital currency serves merely as a circulation medium, motivating enterprises to settle quickly to reduce capital occupation costs. After interest is introduced, the digital renminbi possesses competitive attributes against Hong Kong's offshore renminbi deposits. Multinational corporate treasury centers can use it as an interest-bearing liquidity management tool, allowing for longer stays within Hong Kong's compliance framework.

Currently, the proportion of digital renminbi in mBridge transactions has exceeded 95%, and the interest-bearing policy is expected to convert this flow advantage into a stock advantage, helping to expand and deepen Hong Kong's offshore renminbi fund pool and consolidate its hub position.

Second, interest-bearing enhances the credit attractiveness of digital renminbi as a currency for issuing and settling tokenized assets in Hong Kong.

Hong Kong is vigorously promoting the tokenization of assets such as bonds. In such delivery versus payment (DvP) settlements, the credit rating of the settlement currency directly relates to the risk pricing and market acceptance of the product. The interest-bearing digital renminbi, backed by national credit, has a credit rating far exceeding that of any single bank's tokenized deposits.

The Hong Kong Monetary Authority's Ensemble project has explored the interoperability of tokenized deposits, while Digital Renminbi 2.0 can serve as a higher-level settlement asset to access this ecosystem. Utilizing the programmability of digital renminbi, it can automate the dividend distribution process of bonds or the conditions for trade financing, significantly enhancing efficiency and reducing operational risks.

This provides a potential and superior underlying financial infrastructure option for Hong Kong to issue high-end products such as tokenized government green bonds.

Third, interest-bearing activates the innovation space for financial services around digital renminbi, bringing collaborative opportunities to Hong Kong's fintech sector.

As digital renminbi becomes a bank-operable and interest-bearing liability, deposit, wealth management, financing, and smart contract management services will emerge around it.

Hong Kong, with its common law system aligned with international standards and an active financial market, is an ideal "sandbox" for testing such innovative services. For instance, compliant gateways connecting digital renminbi wallets with virtual asset platforms could be developed, or structured wealth management products based on its interest-bearing characteristics could be designed.

This innovative synergy will enable Hong Kong to take the lead in product design and rule-making in digital finance.

Fourth, interest-bearing deepens the differentiated collaborative strategy between digital renminbi and Hong Kong's "e-HKD."

Hong Kong has clearly prioritized the development of wholesale "e-HKD," focusing on large transactions and capital market applications between financial institutions. The interest-bearing Digital Renminbi 2.0 can primarily serve cross-border retail payments, trade settlements, and related derivative financial services closely connected to the mainland's real economy.

The two are not substitutes but form a clear complementary pattern: e-HKD optimizes local wholesale financial efficiency, while digital renminbi deepens cross-border economic connections. This collaboration allows Hong Kong to simultaneously strengthen its local financial infrastructure and cross-border bridge functions.