Asian governments are rapidly researching and developing CBDC. Will this have any effect on the region's overdependence on the US dollar?

The growing influence of cryptocurrencies forces many countries to create their own cryptocurrencies instead. Over the past few years, these countries have been researching central bank digital currencies () - i.e. digital version of government-issued fiat currency (fiat).

CBDC projects in Asia

With the ability to use technology government to create the foundation for a simplified fiscal policy, not to mention tweaking security features and even providing cross-border banking to bankless countries makes continues to receive much attention from other governments around the world.

Currently, surveys show that more than 80% central banks are researching CBDCs. Some are testing the feasibility of creating a fully functional CBDC. Among the central banks surveyed, 10% plans to offer a retail version of CBDC within the next 3 years, another 20% within the next 6 years.

In Asia, China was the first country in the world to issue a CBDC after establishing a task force in early 2014. By 2016, the People's Bank of China (PBoC) established the Monetary Institute Digital to develop the CBDC's propotype.

Major banks in Asia have shown great interest in CBDCs as the Central Banks of Thailand, Hong Kong, and China work to create digital master technology (DLT) for a CBDC propotype to be used to narrow. about countries.

China

China is among the world's leading economic powers that accept digital currency by issuing a digital yuan - the CBDC project for the PBoC to issue.

China's Digital Yuan Electronic Payments Project (DCEP) is set to completely replace cash payments and has been deployed in major cities since April 2020.

The DCEP project is controlled, monitored and registered using a mobile app created by the government. This makes it possible for the government to freeze user accounts at will.

Perhaps one of the project's advantages is that users on China's DCEP network can reverse or correct erroneous transactions. This is one of the features that don't exist on decentralized digital currencies like .

Other countries (especially the United States) are increasingly concerned that the formation of a CBDC will help China tighten its scrutiny of private citizens and companies.

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The project is also seen as an attempt to replace the dominance of the US dollar in international trade. Even so, China's e-CNY is still focused on localization as no Asian country wants to take CBDCs internationally.

Hong Kong

Recently, the Hong Kong Monetary Authority (HKMA) has released a white paper on a plan to test the benefits of CBDCs for international trade activities.

Hong Kong is currently managed under the framework of one country, two systems. The country maintains a separate financial and judicial system from mainland China. However, the HKMA is working with the Central Bank of China to look into developing the infrastructure of a digital Hong Kong dollar (e-HKD).

According to the white-paper: "The proposed design in Hong Kong's e-HKD features a flexible and efficient 2-tier distribution model of the CBDC that allows for private transactions, traceability and cross-border numbers."

The white-paper is the result of a CBDC study by the Hong Kong financial authority that has been conducted since 2017 under the name "Project LionRock". The HKMA has considered the opinions of industry experts and plans to conduct more tests to ensure retail and merchant CBDC readiness.

South Korea

South Korea's latest move towards CBDCs is that the central bank has invited a technology partner to have a CBDC pilot running through the end of the year.

In a report published by the BoK in February of this year, the central bank announced plans to test and distribute the digital won and outlined regulatory challenges for the state-owned cryptocurrency. issuing country.

In addition to selecting a technology partner to help with the project, the BoK also announced that its CBDC will first operate in a limited test environment to analyze the functionality and security of the CBDC.

South Korea's cash transactions are falling, and the central bank is just taking preparatory steps "for the expected changes in the payment system (worldwide)," a BoK official commented. )".

Philippines

In the summer of 2020, the country's central bank began considering the creation of a CBDC by setting up a task force to study the issue.

Bangko Sentral ng Pilipinas confirmed in an online meeting that a committee has been formed to review CBDCs. During the meeting, Governor Benjamin Diokno said that a feasibility test and a review of the policy mechanism for the issuance of CBDCs are underway.

Like most traditional governments and financial institutions, officials in the Philippine government have not been shy about acknowledging the importance of technology. . Diokno said: “For us, cryptocurrency is not only an asset but also a technology its foundation”.

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In line with these ideas, the Philippine Department of Budget has partnered with the Digital Asset Exchange of the Philippines and Union Bank to launch a blockchain-powered mobile application for the distribution of government-issued treasury bonds. .

However, a few months later, the Central Bank of the Philippines denied the possibility of issuing a CBDC at any time. The central bank notes that its CBDC research has so far benefited from looking at pre-scripted cryptocurrency use cases in private as well as public transactions. other profession.

Singapore

As of early 2016, the Monetary Authority of Singapore has been reviewing CBDC initiatives and is currently looking for commercial partners to develop the currency.

By creating challenges and competition for retail CBDC discovery and development, Singapore has established a healthy diversity of solutions involving more than 300 individuals.

Singapore's CBDC implementation initially collaborated with the "Dunbar Project" institute, which aims to build a domestic CBDC system for the country.

Following that, the Central Bank of Singapore announced cash prizes for the participants of the digital currency project. The finalists in the challenge include a few names such as ANZ Banking Group, Standard Chartered Bank, Criteo, Soramitsu and HSB Bank Limited.

Throughout 2021, the Singaporean authorities have maintained a crypto-friendly stance with approvals allowing crypto trading platforms to function similarly to digital token payment services. is different.

Cambodia

Cambodia’s “Bakong Project” is probably one of the few stable CBDC projects in the country. The Cambodian blockchain money exchange project was first launched in October 2020.

By June 2021, the project is reported to have attracted more than 200,000 users against a reach of more than 5 million users. Moreover, in the first half of 2021, Cambodia's CBDC project has reached 1.4 million transactions with a total value of 500 million USD.

Developed on a super-ledger platform, Cambodia's CBDC features a mobile connection that allows users to connect with financial institutions and make payments without the need for a regulatory entity.

In addition to the stated goal of using CBDCs to eliminate dependence on the US dollar, officials also revealed that the project is also underway to explore the possibility of cross-border transactions through the relationship between the two countries. cooperation with the Central Bank of Thailand and the largest bank of Malaysia.

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Japan

The Bank of Japan joined hands with a group of seven other central banks in October 2020 to form a report examining CBDCs.

Since then, the Bank of Japan (BoJ) has begun researching the core functions of CBDCs. The pilot phase is expected to end in March this year, officials of the Digital Currency Governing Council of Japan have said that the digital yen must be compatible with other CBDCs and the BoJ is still working on it. improve its functions.

The offline capability of CBDCs is also one of Japan's key considerations when establishing a digital currency that can withstand disruptions due to Japan's frequent problems of natural disasters, earthquakes, floods, and earthquakes. tsunami.

At the beginning of 2020, the Deputy Foreign Minister of the National Assembly of Japan said that Japan's cryptocurrency could be a joint venture with public and private partners to align Japan's goals with global changes in the field. fintech.

Thailand

Thailand has cooperated with Hong Kong's HKMS since 2019 to study the use of CBDC in cross-border payments between financial institutions of the two countries.

According to a press release from the Central Bank of Thailand: “The development of the CBDC is an important milestone that has the potential to change the financial infrastructure and financial landscape. This could cause a lot of changes in the roles of many stakeholders.”

Similar to other CBDC initiatives, the Bank of Thailand will consult and respond to the public as well as the private and public on “retail CBDC issuance and development”.

The Bank of Thailand plans to test the use of CBDCs in the second quarter of 2022.

Vietnam

Previously, the Vietnamese Government asked the State Bank of Vietnam to investigate currencies on the blockchain. It looks like Vietnam has joined the list of countries considering CBDCs despite their previous harsh stance on cryptocurrencies.

In May 2020, Vietnam's Ministry of Finance announced a plan to research and develop a regulatory law for the cryptocurrency industry as the country is experiencing high growth in digital currency.

In July, the Government of Vietnam decided to investigate CBDCs with a plan to issue a pilot CBDC for its benefit for a small country in the US dollar-dominated financial system.

Refer cointelegraph.com

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