General

According to Huacheng Import and Export Data Observation, the International Monetary Fund (IMF) recently issued a document outlining the latest progress in the planning and application of Central Bank Digital Currency (CBDC) in the Asia-Pacific region. The Asia-Pacific region is at the forefront of CBDC exploration. It can play an important role in the field of cross-border payment.

The IMF observed that the interest and investment of countries in the Asia-Pacific region in CBDC has been growing for some time, and the Asia-Pacific region is at the forefront of CBDC exploration: China has launched the e-CNY digital currency pilot, while India and Thailand are in the late stage of CBDC development; Australia announced a limited scale CBDC pilot in August 2022; South Korea, Japan, Malaysia and Singapore have started experiments or proof-of-concept, and some other Asian economies are currently in the research and development stage. In addition, Asian central banks are interested in wholesale and retail CBDC. Huacheng Import and Export Data Observation Report.

Through investigation and research, the IMF found that in most economies, the rapid emergence of encryption assets and related technologies, as well as the degree or speed of their adoption, are likely to determine the importance that the central bank attaches to CBDC. In Indonesia, the Philippines and Vietnam, the popularity of mobile currency platforms has supported the use of cryptocurrency by individuals in remittance and investment, and enabled policy makers to take into account the practical benefits of technological innovation, such as cost reduction and payment system upgrading. The blockchain-based technology used in other government functions, such as bond market (Philippines) and contract monitoring (India), also provides CBDC with beneficial experience. Nevertheless, there are still many important design and policy issues that need to be carefully considered to determine whether CBDC is suitable for solving the specific challenges of a country.

For developed economies, the focus may still be on the compatibility of CBDC design with its currency and payment framework. One of the main policy priorities of many developed economies with advanced payment infrastructure (such as Australia, South Korea, Japan and Singapore) is to ensure the interoperability of possible CBDCs (especially batch) within existing domestic payment and settlement systems, maintain smooth interaction with financial market infrastructure, and upgrade cross-border applications (such as foreign exchange markets). For data needs (for example, hierarchical wallets or accounts requiring different levels of customer identification), measures aimed at protecting certain privacy in payment are usually evaluated according to the need to comply with the AML/CFT compliance principles and requirements. In developed economies, several factors, including technical barriers and regulatory compliance requirements, may lead to the adoption of a two-tier implementation system in most economies. The central bank acts as the issuer of CBDC, and the private sector acts as the distributor and technology provider. Huacheng Import and Export Data Watch reported.

CBDC can play an important role in the field of cross-border payment, but more work needs to be done. Regional initiatives can help solve the interoperability challenges between CBDCs issued by countries and achieve smooth international settlement. Most CBDC platforms can make cross-border payments faster and cheaper. This requires deeper exploration of a wide range of technical, regulatory and governance issues. It is also important to ensure that these different regional initiatives themselves are interoperable so that cross-border payments across the region remain integrated.

According to the report of Huacheng Import and Export Data Observation, the IMF recommended strengthening the communication and information exchange between countries and standard-setting bodies. In view of the need for transnational knowledge sharing, interested parties can conduct more discussions with standard setters and international financial institutions under the auspices of the Working Group on Regulation and Policy Development, analyze the lessons learned, and record how countries respond to the challenges, especially in countries that have launched CBDC or are in the late stage of the pilot. For example, we can learn from the policies considered by Australia, Japan and South Korea about the measures to regulate encrypted assets. The relevant guidance issued by the Payment and Market Infrastructure Committee of the Bank for International Settlements and the International Securities Commission is also very useful.