Mint Quick Edit | The e-yuan’s interest-paying leap will either fail or lead the global evolution of money

Its state broadcaster has reported that holdings of its digital yuan will start earning interest next year.

The idea is to promote its adoption, secure a lead among central bank digital currencies (CBDCs) and make headway with global usage.

This last bit won’t be easy without Beijing easing capital controls and letting the yuan’s exchange rate float freely; notably, neither straps down the US dollar (so far).

That said, we must watch China’s test-run of an interest-paying CBDC closely.

Will we see a flight of bank deposits to the full-safety of software run by the central bank that issues the yuan?

Would Chinese banks be asked to focus on risk-pricing for lending and rely more on central-bank funding instead of retail deposits?

China’s case could yield some lessons on how banking should evolve in response to new tech enablers.

Unfortunately, how much user privacy the e-yuan offers is unknown; nor can we guess if this will impact its adoption.

It’s also unclear if China’s e-money can be programmed in ways that may prove popular.

Should Beijing’s great currency leap work out well, though, it would count as global leadership.