The Role of Commercial Banks in the Context of Central Bank Digital Currencies

Central banks worldwide are actively exploring the issuance of Central Bank Digital Currencies (CBDCs), a trend that profoundly impacts the operating models and market landscape of traditional commercial banks. As core components of the financial system, commercial banks need to adjust their strategies to adapt to the digital currency era. This article will use China's Digital Yuan (e-CNY) as an example to discuss commercial banks' response strategies, opportunities, and challenges in this transformation.

Two-Tier Operating Architecture and Core Functions of Commercial Banks

How Commercial Banks Respond to Central Bank Digital Currency Issuance: Taking the Digital Yuan as an Example

China's Digital Yuan (e-CNY) adopts a "central bank—commercial institution" two-tier operating architecture. The People's Bank of China is responsible for the issuance and top-level design of the Digital Yuan, while commercial banks, as designated operating institutions, undertake critical implementation service functions. These functions include:

  • Providing Digital Yuan wallet opening, exchange, and payment services for individuals and enterprises.
  • Ensuring the security of customers' Digital Yuan funds.
  • Fulfilling compliance responsibilities such as Anti-Money Laundering (AML) and Know Your Customer (KYC).

To introduce more market participants and promote payment system innovation, the People's Bank of China added 12 new commercial banks as Digital Yuan business operating institutions in March and April 2026, bringing the total number of operating institutions to 22.

Digital Yuan 2.0 Upgrade: Incentives and Impact

How Commercial Banks Respond to Central Bank Digital Currency Issuance: Taking the Digital Yuan as an Example

Since January 1, 2026, the Digital Yuan has been upgraded from its initial "digital cash" (M0) to "digital deposit currency" (e-CNY 2.0). This upgrade is a milestone, primarily reflected in:

  • Inclusion in Commercial Bank Liability System: Digital Yuan balances are now included in commercial banks' liability systems and are institutionally linked with traditional bank deposits.
  • Interest-Bearing Mechanism: Real-name wallet balances now accrue interest, addressing the previous lack of inherent economic incentives for commercial banks to promote the Digital Yuan.
  • Deposit Insurance Coverage: Digital Yuan balances are covered by deposit insurance, up to a maximum of 500,000 RMB, further enhancing user and commercial bank confidence.

This upgrade provides stronger economic impetus and institutional guarantees for commercial banks to participate in the promotion and application of the Digital Yuan.

Exploration and Practice of Cross-Border Payments

Commercial banks play a crucial role in the cross-border application of the Digital Yuan, actively participating in several innovative projects:

How Commercial Banks Respond to Central Bank Digital Currency Issuance: Taking the Digital Yuan as an Example

  • Multiple Central Bank Digital Currency Bridge (mBridge): Jointly built by the Digital Currency Institute of the People's Bank of China, the HKMA, the Bank of Thailand, and the Central Bank of the UAE. The project completed a pilot test based on real transactions in September 2022, with 20 commercial banks participating and a total amount exceeding HKD 171 million. As of the end of 2025, mBridge had cumulatively processed 4,047 cross-border payment transactions, with a transaction value equivalent to RMB 387.2 billion, of which the Digital Yuan accounted for approximately 95.3%.
  • "Digital Currency Express" (CBETS) Platform: Built and operated by the Digital Yuan International Operations Center, it is the world's first real-time CBDC/DFC system covering both off-chain and on-chain payments and trade finance businesses. In June 2026, Industrial and Commercial Bank of China (ICBC) released its "Digital Yuan Cross-Border E-commerce Payment Solution" based on the CBETS system, providing an efficient and low-cost new settlement path for cross-border non-bank payment institutions.
  • "Digital Currency Express · LIFT" (CBETS LIFT): Officially launched in September 2026, it aims to translate the CBETS infrastructure capabilities into integrated settlement and investment/financing services in real trade scenarios, addressing practical application issues in cross-border payments.

Opportunities and Challenges for Commercial Banks

The issuance of central bank digital currencies presents both opportunities and challenges for commercial banks:

Opportunities

  • Expand New Businesses: The Digital Yuan can facilitate the expansion of new businesses such as payment and settlement, scenario-based finance, and data services, enhancing customer stickiness.
  • Reduce Operating Costs: Reducing reliance on offline cash operations helps banks lower operating costs and accelerate digital transformation.
  • Facilitate Cross-Border Payments: Promote the internationalization of the RMB, providing more efficient and low-cost payment solutions for cross-border trade and investment.
  • Intelligent Financial Services: Leveraging programmable money capabilities such as smart contracts, banks can offer more innovative and intelligent financial services.

How Commercial Banks Respond to Central Bank Digital Currency Issuance: Taking the Digital Yuan as an Example

Challenges

  • Risk of Fund Outflow: CBDCs may lead to a shift of some deposits from commercial banks to the central bank, affecting banks' deposit base and lending capacity.
  • Technology Investment and System Upgrades: Commercial banks need to invest significant resources in technological innovation and system upgrades to adapt to the operation and transactions of digital currencies.
  • Compliance Requirements: Addressing new compliance requirements such as anti-money laundering and customer identification brought by digital currencies.
  • Market Competition: Facing competition from other financial institutions and technology companies, commercial banks need to continuously improve their service capabilities.

International Perspective on Bank Responses

Globally, 93% of central banks are researching CBDCs. In addition to China's Digital Yuan, commercial banks in other countries are also actively exploring the application of digital currencies. For example, in September 2026, several large UK banks (such as Lloyds Bank, Barclays Bank, HSBC) completed the world's first interbank tokenized deposit transactions, using blockchain technology to transfer funds between themselves, which is seen as a safer alternative to stablecoins. Institutions like the Bank for International Settlements (BIS) also continue to focus on and promote international cooperation and standard-setting in the CBDC field.

How Commercial Banks Respond to Central Bank Digital Currency Issuance: Taking the Digital Yuan as an Example

Digital Yuan Transaction Data Overview

As of the end of November 2025, the Digital Yuan had cumulatively processed 3.48 billion transactions, with a total transaction value of RMB 16.7 trillion. The number of individual wallets opened was 230 million, and the number of institutional wallets opened was 18.84 million. At the regional level, in the first half of 2026, Jiangsu Province's Digital Yuan cross-border transaction volume reached RMB 70.3 billion, nearly three times the total transaction volume for the entire year of 2025, demonstrating the rapid development momentum of the Digital Yuan in the cross-border domain.