What Is Digital RMB? Architecture, Wallets, Ecosystem and Future Challenges

01 What Is Digital RMB?

From a global perspective, central banks and international organizations have been developing Central Bank Digital Currencies (CBDCs) since the 2008 financial crisis. In China, the digital RMB (e‑CNY) is the legal digital form of fiat issued by the People’s Bank of China, backed by a blockchain‑like model and designed as a sovereign liability.

Digital RMB (e‑CNY) is a digital form of legal tender issued by the People’s Bank of China, operated by designated institutions, based on a broad account system, loosely coupled with bank accounts, equivalent to physical cash, and possesses both value and legal tender status.

The digital RMB has five key characteristics:

Low cost : No exchange or circulation service fees are charged by the central bank or operating institutions.

Pay‑to‑settle : It is loosely coupled with bank accounts, enabling payment and settlement without a bound account.

Controlled anonymity : Small‑value transactions are anonymous, while large‑value transactions are traceable under law.

Programmability : Smart contracts can be added without affecting monetary functions, allowing automated payments, escrow, and refunds.

Security : Uses digital certificates, signatures, encrypted storage, and anti‑replay mechanisms to ensure non‑repudiation and tamper‑proof transactions.

02 Digital RMB Wallets

Digital RMB wallets store, manage, and use the currency. They can be mobile apps (e.g., the official "Digital RMB" app), hardware wallets, or other forms, and are divided into personal and corporate wallets.

Four Types of Personal Wallets

Type 1 : Requires on‑site identity verification, binds to a domestic bank account, and offers the highest level of real‑name authentication.

Type 2 : Remote opening, verifies ID, phone number, and bank account; also supports fund transfers between wallet and bound account.

Type 3 : Remote opening, verifies ID and phone number only; does not bind to a bank account, offering weaker real‑name verification.

Type 4 : Remote opening, verifies phone number only; does not bind to a bank account and is an anonymous wallet.

Corporate Wallets

Corporate wallets are opened either at a counter or via online banking. A single legal entity can create multiple sub‑wallets under a parent wallet, with each sub‑wallet uniquely linked to its parent.

03 Digital RMB Service Ecosystem

The ecosystem consists of three layers:

Issuance Layer – Beijing & Shanghai "Dual Centers"

The People’s Bank of China holds central authority, overseeing issuance, cancellation, inter‑institution connectivity, and wallet ecosystem management. Two operational centers—Beijing’s "Digital RMB Operation Management Center" and Shanghai’s "Digital RMB International Operation Center"—focus respectively on system construction/maintenance and cross‑border cooperation.

Exchange Layer

Six state‑owned commercial banks, two leading joint‑stock banks (China Merchants Bank, Industrial Bank), and two large third‑party payment‑driven internet banks (MyBank, WeBank) act as designated operators providing exchange services.

Circulation Layer

Other commercial banks, non‑bank financial institutions, telecom operators, device manufacturers, chip and security vendors, software vendors, and scenario developers provide circulation services to the public, including settlement for small banks, fintech firms, and merchants.

04 Development Timeline

Research began in 2014; a framework was set in 2018; the 2021 white paper defined a dual‑layer operating model. Pilot projects started in 2019 across major cities and expanded to 26 pilot regions covering most of China. By September 2025, 2.25 billion personal wallets had been opened, processing 33.2 billion transactions worth 14.2 trillion RMB.

Effective 1 January 2026, the new action plan launched the second‑generation digital RMB, shifting from a cash‑like M0 instrument to a deposit‑type M1 instrument that can earn interest, thereby acquiring full monetary functions.

The upgrade transforms digital RMB from "digital cash" (M0) to "digital deposit currency" (M1), integrating it into commercial banks' liability structures and allowing wallet balances to accrue interest, thus fulfilling the complete set of monetary functions.

05 Cross‑Border Payment Exploration

In December 2025, the People’s Bank of China highlighted digital RMB as a core engine for internationalization, promising lower costs, faster settlement, and higher transparency compared with traditional SWIFT‑based cross‑border payments.

Projects such as the multilateral CBDC bridge (mBridge) connect China, Thailand, the UAE, and Hong Kong, using distributed ledger technology to enable near‑instant, low‑cost cross‑border settlements.

06 Future Trends and Challenges

Centralization vs. Decentralization : Traditional banks rely on centralized account systems, while the underlying blockchain of digital RMB promotes decentralization, creating a tension that the current hybrid architecture must reconcile.

Legal and Regulatory Gaps : Existing AML/KYC frameworks and payment regulations need adaptation to accommodate a programmable, interest‑bearing digital currency.

Insufficient Use‑Case Momentum : Despite advantages like low cost and programmability, everyday consumer adoption remains limited; stronger incentives are expected in cross‑border, tax, and grant scenarios.