- Central banks in Asia are leading the charge in creating their own digital currencies.
- Cross-border interoperability in Asia, for their CBDCs, is contingent on regional cooperation.
At unprecedented rates, most governments in Asia are either researching or implementing CBDCs. The Covid-19 pandemic sparked a significant rise in the spread of digital payments and cryptocurrencies. The pandemic has prompted several central banks to test CBDCs. The continent has long been a leader in the adoption of new financial technology:
Cross-border interoperability is a priority for Asia’s central banks
China’s invention of the world’s first CBDC prompted a new financial focus. It was established as early as 2014, and several Asian nations began following suit a lot sooner than that. Many of these nations now have CBDCs in place, are considering them, or have already established them.
For several Asian nations, CBDCs are nearing the trial stage. The success has prompted a debate about how the currencies will function. The issue has evolved regarding how closely Asia’s central banks should collaborate.
Under the Association of Southeast Asian Nations Payment Connectivity program, agreements were reached in 2019 for closer ties between member states to enhance payment system interoperability. The agreement has been particularly beneficial to CBDC development.
Although some CBDCs are already up and running, there is still a long way to go before fully operational. They will, however, require even more regional collaboration. There are a few issues that particular central banks in the region must work out. In the event of collaboration, more minor bugs are preferred over larger ones for CBDC implementation.
One primary concern is how the currencies will be stored and traded. Is it possible that central banks will choose to run their currencies on the blockchain, or do they plan to disregard it and follow the path laid out by China?
Asia region leads in CBDC global adoption
Asian banks have shown great interest in CBDCs, and the continent is being pushed towards financial innovation. Digital banking and cryptocurrency are revolutionizing Southeast Asia’s financial services. Here are some CBDCs milestones in the region:
The People’s Bank of China (PBoC) launched a CBDC project with the release of the digital yuan, making China one of the world’s top economies. The nationwide launch of Cambodia’s CBDC, known as Bakong, took place in October 2020. Indonesia’s central bank revealed that it was working on a CBDC.
The Hong Kong Monetary Authority (HKMA) recently published a white paper outlining its intentions to research the advantages of retail CBDCs. The Bank of Korea (BoK) has taken the lead in South Korea’s latest bid for a CBDC.
Thailand teamed up with the Hong Kong Monetary Authority to conduct a test of a CBDC that would be utilized in cross-border payments between banks in both nations. As of now, the continent leads in the global adoption of CBDCs.