The rapid growth of public attention to cryptocurrencies has forced numerous governments to create their digital alternatives. In recent years, interest from various jurisdictions has pointed toward central bank digital currencies (CBDCs), digital versions of government-issued fiat money.
Given its ability to use Blockchain technology to facilitate simplified tax policy not to mention calibrating privacy features and even providing cross-border banking services to the unbanked, CBDCs continue to gain even more attention from various governments around the world.
Surveys show that more than 80% of central banks are investigating CBDCs, and some are working on proofs of concept that could lead to the introduction of fully functional CBDCs. Of the central banks surveyed, 10% plan to offer a retail version of a CBDC in the next three years, and another 20% plan to take the plunge in less than six years.
In Asia, these efforts have been compounded by China’s launch of the world’s first CBDC after creating a task force as early as 2014. In 2016, the People’s Bank of China (PBoC) had already created a Digital Currency Institute, which developed a prototype of CBDC.
Major Asian banks have shown great interest in CBDCsThe reports show the collaborative efforts of the central banks of Thailand, Hong Kong and China to create a digital distributed ledger (DLT) technology for a CBDC prototype designed to bridge cross-border gaps.
In this article, we give you a brief look at some CBDC projects under development on the Asian continent.
China
China is one of the world’s leading economies to adopt digital currencies with the launch of the digital yuan, a draft of a CBDC issued by the PBoC.
Christened Electronic Digital Currency Payment (DCEP), China’s digital yuan (e-CNY) is intended to fully replace cash payments and has been deployed in major cities across the country since April 2020. .
China’s DCEP, while exhibiting some anonymity features, is controlled, tracked, and registered in smartphone apps by the Chinese government, giving them the ability to freeze accounts at will.
Perhaps one of its advantages is the fact that users of China’s DCEP network can reverse or correct erroneous transactions, which is one of the non-existent features in decentralized digital currencies like Bitcoin (BTC).
As China’s CBDC takes shape, several countries (especially the United States) are increasingly concerned that the new CBDC initiative will help China step up surveillance on its citizens and private companies.
The move is also seen as an attempt to supplant the dominance of the US dollar in international trade. Even so, China’s e-CNY remains highly localized, with the Asian nation having made no significant attempts to internationalize its CBDC.
Hong Kong
Recently, the Hong Kong Monetary Authority (HKMA) published a white paper looking at plans to experiment with the advantages of retail CBDCs for the city’s cross-border markets.
Hong Kong is currently governed by a framework of “one country and two systems”, in which it maintains its own financial and judicial system separate from mainland China. However, HKMA is working with China’s central bank to explore the development of its infrastructure. Hong Kong digital dollar (e-HKD).
According to the white paper, “The architecture proposed in the Hong Kong e-HKD presents a flexible and efficient two-tier distribution model of a CBDC that allows for the preservation of transaction privacy, traceability and cross-border accounting synchronizations.”
The white paper is the result of research by the CBDC by Hong Kong’s leading financial authority that has been ongoing since 2017 under the aegis of the “LionRock Project.” HKMA considered the opinions of academic and industry experts and plans to conduct further testing to ensure the preparation of a retail and wholesale CBDC.
South Korea
In South Korea, the Bank of Korea (BoK) has asked a technology partner to help it run a CBDC pilot program until the end of the year.
In a report released by the Bank of Korea in February this year, the central bank announced its plans to test and distribute a digital won, while describing the legal challenges that accompany a state-issued digital currency.
In addition to selecting a technology partner to help you with the project, andl BoK has also announced that its CBDC will first operate in a limited test environment to analyze its functionality and security.
According to previous statements by a BoK official, cash transactions in South Korea are declining, and the central bank is only taking steps to prepare. “for planned changes in payment settlement systems [en todo el mundo]. “
Philippines
In the summer of 2020, the central bank began considering creating a CBDC by forming a committee working group to study the matter.
The Bangko Sentral ng Pilipinas had confirmed in a virtual briefing that a committee had been created to study CBDC. At the briefing, Governor Benjamin Diokno explained that a feasibility test and evaluation of the political mechanisms of issuing a CBDC was underway.
Like most governments and traditional financial institutions, Philippine government officials had no qualms about admitting the importance of blockchain technology. Diokno said: “Cryptocurrency for us has always been beyond the asset itself, but rather on the blockchain technology that underpins it.”
Consistent with these observations, The Philippine Treasury Office, in collaboration with the Philippine Digital Asset Exchange and UnionBank, had launched a mobile application built on blockchain technology to distribute government-issued treasury bonds.
However, a few months later, the central bank of the Philippines rejected the possibility of issuing a short-term CBDC. Citing the need for continued research and study, the country’s central bank noted that its CBDC research thus far could benefit from observing established use cases for digital currencies in the private sector, as well as other. industrial applications.
Singapore
As early as 2016, the Monetary Authority of Singapore had been studying CBDC initiatives and is now looking for business partners to help develop the currency.
By establishing challenges and competitions to discover and develop a retail CBDC, Singapore was able to establish a healthy diversity of solutions with the participation of more than 300 people.
Singapore’s initiative to launch a CBDC started as a joint project with an institute called “Project Dunbar” which mainly focused on creating a retail CBDC of its own for the country.
Soon after, Singapore’s central bank announced prize money for participants to submit ideas on the digital currency. Finalists for the challenge included ANZ Banking Group, Standard Chartered Bank, Criteo, Soramitsu, and HSB Bank Limited, to name a few.
Throughout 2021, Singapore authorities have maintained a pro-cryptocurrency stance with approvals given to cryptocurrency exchanges to operate similarly to other digital payment token services.
Cambodia
The “Bakong Project” Cambodia is probably one of the few fully operational retail CBDCs out there. The country’s blockchain-enabled money transfer project was originally launched in October 2020.
In June 2021, the project was reported to have accumulated more than 200,000 users with a general indirect reach of more than five million users. In addition, in the first half of 2021, the Cambodia CBDC project achieved a transactional throughput of 1.4 million transactions worth USD 500 million.
Developed on a hyper ledger platform, Cambodian CBDC has mobile connectivity that allows users to connect to financial institutions and make payments without a centralized clearinghouse.
Aside from the stated goal of using the CBDC to shed dependence on the US dollar, officials also revealed that there are plans in place to explore a cross-border transaction capability through a partnership with the central bank of Thailand and the largest bank in Malaysia.
Japan
In Japan, the country’s central bank joined with a group of seven other central banks in October 2020 to publish a report examining CBDCs.
Since then, The Bank of Japan (BoJ) has started a proof of concept to test the basic functions of CBDCs. Although the testing phase was scheduled to end in March this year, officials from Japan’s panel on digital currencies have said that the digital yen should be compatible with other CBDCs and that the BoJ is still filing its main functions.
The CBDC’s offline capacity is one of the key considerations for Japan, striving to establish a shock-resistant digital currency, given Japan’s vulnerability to natural disasters, earthquakes, floods, and tsunamis.
In early 2020, Japan’s Parliamentary Deputy Minister of Foreign Affairs said that the Japanese digital currency could be a joint venture with public and private partners to align Japan’s target with global changes in financial technology.
Thailand
Since 2019, Thailand has joined forces with the Hong Kong HKMA to test the use of a CBDC that would be used for cross-border payments between financial institutions in both countries.
According to a Bank of Thailand press release, “The development of a CBDC is a key milestone with the potential to alter the financial infrastructure and ultimately the financial landscape that could cause many changes in the roles of many stakeholders.”
Like other CBDC initiatives, the Bank of Thailand will seek consultation and comment with the general public, as well as the private and public sector, on the “development and issuance of a retail CBDC.”
The Bank of Thailand plans to start pilot tests for the use of its CBDC in the second quarter of 2022.
Vietnam
Previously, the Vietnamese government had requested the State Bank of Vietnam to investigate blockchain-based currencies. It appears that Vietnam has joined the growing list of jurisdictions studying CBDCs, despite its previous tough stance on cryptocurrencies.
In May 2020, the country’s finance ministry announced plans to investigate and formulate a regulatory law for the cryptocurrency industry, even as the country experienced high levels of growth from digital currencies.
In July, the Vietnamese government decided to investigate CBDCs with plans to issue a pilot CBDC, given its usefulness to a small country in a global financial system dominated by the US dollar.
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