China Tightens Crypto Oversight, Expands Digital Yuan in 2026

China’s central bank is tightening oversight of crypto assets while upgrading its digital yuan system starting this month.

This is part of a bigger plan to make payments safer, modernize the financial system, and limit risks from cryptocurrencies and other private digital money.

Lu Lei, Vice Governor of the People’s Bank of China (PBOC), said the country wants to encourage digital finance while keeping strict rules to protect the economy.

Notably, the plan focuses on a new version of the digital yuan, or e-CNY, supported by the central bank’s Action Plan, which is based on over ten years of research and testing.

The digital yuan will change from “digital cash” to “digital deposit money,” meaning it will work more like money in a bank account instead of like cash or cryptocurrency.

As of November 2025, the digital yuan had handled 3.48 billion transactions worth about 16.7 trillion RMB. Over 230 million people and nearly 19 million companies have opened digital yuan wallets, showing it is becoming widely used in China.

Meanwhile, Chinese officials once again drew a line between state-backed digital currency and cryptocurrencies. The central bank said crypto and stablecoins have helped digital payments grow worldwide, but they also bring risks, like bypassing banks, encouraging shadow banking, and making it harder to control the money supply.

They warned that unregulated digital payment tools can create a separate financial system outside government rules, which makes the economy riskier. This is why China keeps strict rules on crypto while supporting its own digital currency.

Notably, China will keep running the digital yuan with a two-tier system: the central bank manages the overall system, while commercial banks handle user wallets and payments. Money in digital yuan wallets at banks will count like bank deposits and be part of reserve requirements.

Commercial banks will make sure the system is secure and follows anti-money-laundering rules. Non-bank payment companies must keep full reserves for any digital yuan they handle.

Even though China is careful about decentralization, the digital yuan will use a hybrid system that combines regular bank accounts with blockchain technology. This allows the e-CNY to support features such as smart contracts, offline payments, and programmable capabilities, while keeping the government in control.

Officials say this system makes payments cheaper and faster, keeps transactions traceable, and follows the rules. Blockchain will be used mainly in areas like supply chains, public services, and cross-border payments.

The PBOC also plans to expand the digital yuan for international use. China’s work on the mBridge project has already handled over 4,000 cross-border transactions, with the digital yuan making up more than 95% of the volume.

An international operation center will open in Shanghai to make cross-border payments cheaper, faster, and easier for trade.

To manage risks, China will create new governance groups, including a Digital RMB Management Committee and special operation centers for domestic and international use. They will use advanced tools such as AI and blockchain to monitor for problems in real time.

The central bank said stability comes first, and innovation will only happen under tight control. China’s plan is essentially to limit private cryptocurrencies while growing its own state-controlled digital currency that works at home and abroad.

Ultimately, in 2026, the digital yuan is set to play a bigger role in payments, finance, and international trade, all under strict oversight.