The rapid growth of widespread attention to cryptocurrencies has forced numerous governments to create their digital alternatives. In recent years, interest from various jurisdictions has been toward central bank digital currencies (CBDCs), digital versions of government-issued fiat currencies.
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 receive even more attention from various governments around the world.
Surveys already show that more than 80% of central banks are researching CBDCs, with some working on proofs of concept that could eventually lead to the introduction of fully functional CBDCs. Outside central banks surveyed, 10% plan to offer a retail version of a CBDC in the next three years, with another 20% ready to make the switch in less than six years.
In Asia, these efforts have been compounded by China's launch of the world's first CBDC after establishing a task force. already in 2014. By 2016, the People's Bank of China (PBoC) had already established a Digital Currency Institute, which developed a CBDC prototype.
Major Asian banks have shown great interest in CBDCs as reports show collaborative efforts by the central banks of Thailand, Hong Kong and China to create a digital ledger technology (DLT) for a CBDC prototype designed to bridge cross-border gaps.
In this article, we take a brief look at some CBDC projects under development on the Asian continent.
porcelain
China is among the world's leading economies to embrace digital currencies with the launch of the digital yuan, a CBDC project issued by the PBoC.
Dubbed electronic digital currency payment (DCEP), China's digital yuan (e-CNY) is set to completely replace cash payments and has been unfolded in the main cities of the country since April 2020.
China's DCEP, while having 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 features that does not exist in decentralized digital currencies like Bitcoin (BTC).
As China's CBDC takes shape, several countries (notably the United States) have become increasingly concerned that the new CBDC initiative will help China tighten greater vigilance over its citizens and private companies.
The move is also seen as an attempt to supplant the dominance of the US dollar enjoy in international trade. Still, China's e-CNY remains highly localized with no significant attempts by the Asian nation to bring its CBDC internationally.
Hong Kong
Recently, the Hong Kong Monetary Authority (HKMA) released a whitepaper looking at plans to experience the benefits of retail CBDCs for the city's cross-border markets.
Hong Kong is now governed under a one-country, two-system framework, where it maintains its own financial and judicial system separate from mainland China. However, HKMA is working with China's central bank to explore infrastructure development of your Hong Kong digital dollar (e-HKD).
According to the white paper, "The proposed architecture in the Hong Kong e-HKD presents a flexible and efficient two-tier distribution model of a CBDC that enabled transactions that preserve privacy, traceability, and cross-border accounting book synchronizations."
The white paper is the result of the CBDC investigation by Hong Kong's top financial authority that has been ongoing since 2017 under the aegis of the "LionRock Project." The HKMA considered the opinions of academic and industry experts and plans to conduct further trials to ensure the preparation of both a retail and wholesale CBDC.
South Korea
South Korea's latest move towards a CBDC has seen the Bank of Korea (BoK) make calls for a technology partner to help pilot a CBDC program that will run through the end of the year.
In a report published by the BoK in February this year, the central bank announced plans to test and distribute a digital won while outlining the legal challenges that accompany a state-issued digital currency.
In addition to selecting a technology partner to assist with the project, BoK has also announced that its CBDC will first operate in a limited test environment to analyze the functionality and security of the CBDC.
According According to previous comments by a BoK official, South Korea's cash transactions are declining and the central bank is only taking steps in preparation โfor the expected changes in payment settlement systems. [worldwide]. "
The philippines
In the summer of 2020, the central bank began consider creating a CBDC forming a committee working group to study the issue.
Bangko Sentral ng Pilipinas had confirmed in a virtual briefing that a committee had been created to investigate CBDC. At the briefing, Governor Benjamin Diokno explained that a feasibility test and an evaluation of the policy mechanisms for issuing a CBDC were underway.
Like most governments and traditional financial institutions, Philippine government officials were not ashamed to admit the importance of blockchain technology. Diokno said: "For us, cryptocurrency has always been beyond the asset itself, but more into the blockchain technology that underpins it."
Consistent with these observations, the Philippine Treasury, in association with the Philippine Digital Asset Exchange and UnionBank, had launched a mobile application built on blockchain technology to distribute government issued treasury bonds.
A few months later, however, the central bank of the Philippines reject the possibility of issuing a CBDC anytime. Citing the need for ongoing research and study, the country's central bank noted that its CBDC research thus far could benefit from looking at established use cases for digital currencies in the private sector, as well as other industrial applications.
Singapore
Since 2016, the Monetary Authority of Singapore had been investigating CBDC initiatives and now looking for business partners to help develop the coin.
By establishing challenges and contests 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 decision to launch a CBDC started as a joint project with an institute called the โDunbar Projectโ that focused primarily on building an in-house retail CBDC for the country.
Soon after, Singapore's central bank announced cash prizes for participants issuing digital currency ideas. The finalists for the challenge were ANZ Banking Group, Standard Chartered Bank, Criteo, Soramitsu, and HSB Bank Limited, to name a few.
Throughout 2021, Singapore authorities have maintained a crypto-friendly stance with approvals given to cryptocurrency exchange platforms to operate similarly to other digital payment token services.
Cambodia
Cambodia's โBakong Projectโ is probably one of the few fully operational retail CBDCs out there. The country's blockchain-enabled money transfer project was originally released in October 2020.
By 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. Furthermore, in the first half of 2021, the Cambodia CBDC project achieved a transactional yield of 1.4 million. proceedings valued at $ 500 million.
Developed on a hyper-ledger platform, Cambodia's CBDC features mobile connectivity that enables users to connect to financial institutions and make payments without a centralized clearinghouse.
In addition to the stated goal of using the CBDC to eliminate dependence on the US dollar, officials also revealed that plans are underway 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 a group of seven other central banks in October 2020 to publish a report that examined the CBDC.
Since then, the Bank of Japan (BoJ) has begun a proof of concept for test basic CBDC functions. While 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 still is. clarifying its key functions.
An offline capability of the CBDC is one of Japan's central considerations as it strives to establish a digital currency that is resilient to disruptions given Japan's vulnerability to natural disasters, earthquakes, floods, and tsunamis.
In early 2020, Japan's Parliamentary Deputy Foreign Minister said that Japan's digital currency could be a joint venture with public and private partners to to line up Japan's target with global changes in fintech.
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, which could cause many changes in the roles of many parties. interested ".
Similar to other CBDC initiatives, the Bank of Thailand will seek consultation and comment with the general public, as well as the public and private sector on the "development and issuance of retail CBDCs."
The Bank of Thailand plans to initiate pilot tests for the use of its CBDC in the second quarter of 2022.
Vietnam
Previously, the Vietnamese government had applied for the State Bank of Vietnam to research blockchain-based currencies. It appears that Vietnam has joined the growing list of jurisdictions seeking CBDC despite its previous tough stance on cryptocurrencies.
In May 2020, the country's finance ministry announced plans to research and formulate a regulatory law for the crypto industry, even as the country experienced high levels of growth in digital currencies.
In July, the Vietnamese government decided to investigate CBDC with plans to issue a pilot CBDC, given its usefulness for a small country in a global financial system dominated by the US dollar.
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