Central Bank Unveils Digital Yuan Vision: Strategic Framework for Commercial Bank Liabilities and Cross-Border Settlements

In late December, Lu Lei, Vice Governor of the People’s Bank of China, articulated a comprehensive vision for the future digital yuan during recent remarks. The emerging digital currency represents a pivotal shift in China’s approach to monetary infrastructure, going beyond traditional digital payment systems to establish a robust framework that integrates modern financial architecture with distributed ledger capabilities.

Three Core Capabilities Define the Future Digital Yuan

Lu Lei’s remarks outlined that the digital yuan will embody three fundamental functions essential to modern monetary systems. First, it will serve as a measure of value, establishing itself as the standard unit of account within China’s financial system. Second, it operates as a repository of wealth, enabling individuals and institutions to maintain purchasing power across time. Third, the digital yuan will facilitate seamless cross-border payments, positioning China’s currency at the forefront of international settlement mechanisms. These three capabilities represent not merely technical features but rather strategic functions designed to address real-world economic demands across multiple sectors and jurisdictions.

Commercial Bank Liabilities: The Distributed Architecture

The structural foundation Lei outlined emphasizes that the future digital yuan will incorporate the attributes of commercial bank liabilities while maintaining account-based compatibility with distributed ledger technology. This hybrid approach enables multiple financial institutions to participate in digital currency circulation, distributed under the technical support and regulatory oversight of the People’s Bank of China. By anchoring the digital yuan within the existing commercial banking system, the central bank ensures stability while promoting broader adoption across the financial ecosystem.

Meeting Diverse Economic Scenarios Through Strategic Inclusion

The development philosophy underpinning the digital yuan prioritizes meeting the requirements of the real economy. Rather than imposing a one-size-fits-all approach, policymakers are adopting an inclusive framework that remains prudent in selecting between account-based and value-based digital currency models. This flexibility allows the digital yuan to adapt to different business environments, from retail transactions to institutional settlements, and from domestic operations to international trade scenarios. The strategic aim is to ensure that as implementation progresses, the digital yuan serves not a single use case but rather a comprehensive spectrum of financial needs.

Forward-Looking Infrastructure Development

The People’s Bank of China’s commitment extends beyond the digital yuan itself to encompassing the entire management and service ecosystem. Recent policy initiatives focus on strengthening infrastructure systems that support digital RMB operations, positioning China to lead in next-generation monetary infrastructure. These developments suggest that the digital yuan represents the first phase of a broader transformation in how central bank money functions within an increasingly digital financial landscape.