Reports in the Financial Times that China is preparing to commercialise Project mBridge, the multi-central bank platform that settles cross-border payments directly in digital currencies, have revived the familiar question of whether Beijing can loosen the dollar’s grip.
The platform has now handled around $69bn in cross-border settlement, up from $55bn the Atlantic Council tracked in November 2025, with the digital renminbi making up roughly 95% of the total. But this figure is the wrong thing to watch. The more consequential decision took effect quietly on 1 January, when the People’s Bank of China reclassified the digital renminbi from digital cash into interest-bearing deposit money.
That reclassification is the step other central banks examined but declined to take. The question it answers – whether a central bank digital currency can pay a return, and so be worth holding, without draining deposits from commercial banks – is the central design problem of retail CBDCs. Most monetary authorities have avoided it by refusing to take the risk.
The disintermediation problem
The European Central Bank committed to paying no interest on the digital euro and proposed holding limits, precisely to stop it becoming a savings vehicle that pulls funding from banks. The Federal Reserve’s 2022 review warned that an interest-bearing CBDC could do the same and heighten run risk, and Washington has since stepped back from a retail CBDC altogether.
The fear is disintermediation: when the safest money in the system also earns a return, balances migrate from commercial banks to the central bank, eroding the deposit base that banks lend against and, under stress, accelerating digital runs. The orthodox response has been to keep retail digital money cash-like, unremunerated and capped.
China’s design takes the opposite turn, but with a twist that is easy to miss. It has not made central bank money interest-bearing. It has reclassified the digital renminbi held in commercial-bank wallets as a bank deposit liability: remunerated at deposit rates, covered by deposit insurance, carried on banks’ balance sheets and folded into their reserve requirements, with non-bank operators holding full reserves against the digital renminbi they distribute.
PBoC Deputy Governor Lu Lei described the instrument as carrying ‘the attributes of commercial bank liabilities.’ The digital renminbi is therefore centrally designed and standardised, yet within this framework it behaves like a bank deposit. Because savers are not moving funds to the central bank, the disintermediation the West feared is engineered around rather than ignored.
What changes instead is subtler and arguably more consequential. The central bank is not displacing the commercial banks; it is becoming the standardised layer beneath them, writing the rules and operating the infrastructure for a single, account-based, programmable form of money that participating banks can offer. That money now sits within the direct reach of monetary policy. The state’s monetary footprint expands into the deposit base in exactly the place the West chose to keep it small. The move extends both policy reach and a degree of visibility over balances that were, until now, purely private.
Beijing as a live experiment
The domestic logic is straightforward. For years the digital renminbi has lost to Alipay and WeChat Pay; despite Rmb16.7tn ($2.5tn) in cumulative transactions, everyday use remains thin. With low deposit rates, a wallet that pays interest is the most direct lever Beijing has found to make people hold the currency rather than just spend it and to compete with private platforms and dollar stablecoins on return.
The cross-border ambition is the other motive and it carries a catch. The same framework builds an international digital renminbi centre in Shanghai and is meant to widen the currency’s use abroad; interest is what might persuade foreign institutions to hold renminbi rather than merely route payments through it.
Yet an instrument that is, by Beijing’s own account, a claim on Chinese commercial banks is not the sovereign-grade asset reserve managers prefer and it still sits behind a closed capital account. Even for Hong Kong, the largest offshore-renminbi centre and an mBridge member, the design that makes the digital renminbi stable at home is a harder sell to international users than the ambition assumes.
For central banks elsewhere, China becomes the live experiment they never ran. The ECB and the Fed are still settling their own positions on holding limits and remuneration; they now have a real economy in which to observe how deposits behave and how the system holds under strain. The results on adoption, deposit migration and transmission will be the first real-world evidence on questions the rest of the field has only modelled.
The contest worth watching is not the familiar one between renminbi and the dollar. It is whether a state can make digital public money behave like a private bank deposit without paying the price others were unwilling to risk. China has decided to find out at scale and in public. Everyone else will be taking notes.
Kun Tian is a Senior Lecturer at Kent Business School, University of Kent.
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Kun Tian is a Senior Lecturer at Kent Business School, University of Kent.