What happened On January 1, 2026, the People's Bank of China restructured the e-CNY from the ground up. What had been classified since its 2019 launch as M0 — the digital equivalent of a physical banknote — was formally reclassified as an interest-bearing deposit. The PBoC began paying interest on digital yuan balances held in user wallets and moved to incorporate digital yuan operations into its reserve requirement framework, with wallet balances now held with authorised commercial banks. Commercial banks and other financial institutions can hold e-CNY as a liability and use it for credit creation and balance-sheet management. The scale of what failed is not trivial. By November 2025, the e-CNY had processed cumulatively almost 3.5 billion transactions totalling 16.7 trillion yuan. Those are not insignificant numbers — yet the Peterson Institute for International Economics published analysis in early 2026 titled *China gives up on state-backed digital cash:…