Digital Yuan Takes Shape: Lu Lei Reveals Monetary Functions and Cross-Border Payment Roadmap

On December 29th, 2025, China’s monetary authorities outlined a comprehensive vision for the digital yuan, marking a significant milestone in the nation’s financial modernization efforts. The People’s Bank of China’s Vice Governor Lu Lei articulated key characteristics that will define this digital currency as it evolves from concept to widespread implementation across financial systems.

Foundation in Commercial Banking and Central Bank Oversight

The digital yuan is positioned as a modern digital payment infrastructure that operates within the established financial system, combining the strengths of commercial banking networks with the regulatory oversight of China’s central bank. Rather than replacing existing monetary structures, this approach embeds the currency within commercial bank liabilities while ensuring that the central bank maintains technical governance and supervisory authority. This dual-layer architecture leverages distributed ledger technology, enabling secure transactions while maintaining comprehensive monitoring capabilities essential for monetary policy implementation.

Three Core Functions: Unit of Account, Store of Value, and Cross-Border Settlement

Lu Lei emphasized that the digital yuan will fulfill three critical monetary functions that extend beyond traditional payment capabilities. First, it serves as a recognized unit of account, providing a standardized measure of monetary value across the economy. Second, the currency will function as a reliable store of value, allowing individuals and institutions to maintain purchasing power over time. Third, and increasingly important in global commerce, the digital yuan will facilitate cross-border payments, reducing friction in international transactions and strengthening China’s role in global financial settlement systems.

These functions distinguish the digital yuan from simple digital payment tokens, positioning it as a comprehensive monetary instrument that addresses multiple economic needs simultaneously.

Balancing Innovation: Account-Based and Value-Based Currency Development

The central bank’s strategy embraces a principle of “inclusiveness and prudent selection” regarding the currency’s technical architecture. This approach permits parallel development of both account-based and value-based digital currency models, each serving distinct use cases and participant preferences. Account-based systems emphasize identity verification and transaction history, while value-based systems prioritize anonymity and direct peer-to-peer transfers. By supporting both methodologies, the digital yuan framework accommodates diverse business requirements and consumer preferences, ensuring the currency serves different scenarios within the real economy.

Strategic Roadmap and Future Implementation

The PBOC’s commitment extends beyond the digital yuan itself to encompass broader financial infrastructure improvements. An upcoming “Action Plan on Further Strengthening the Management and Service System and Related Financial Infrastructure Construction of Digital RMB” will provide detailed implementation guidance. This strategic initiative reflects the central bank’s determination to align digital currency development with genuine economic needs, avoiding solutions in search of problems while ensuring the digital yuan becomes an indispensable tool for modern financial commerce.

The convergence of Lu Lei’s policy framework, the digital yuan’s multifaceted monetary attributes, and the underlying commitment to real economy integration suggests that China’s digital currency initiative has matured beyond experimental phases into deliberate, system-wide deployment.