The city financial Authority (HKMA) has warned that stablecoins may undermine the Hong Kong dollar. A recent free discussion paper concerning its retail financial organization’s digital currency, e-HKD. Several within the crypto trade believe that interest in developing central bank digital currencies (CBDC) has been in response to increased private-sector stablecoins. This discussion paper seems to substantiate that view.
Stablecoins can undermine the role of domestic currency
With continued developments in stablecoins, it can’t be ruled out that a preferred stablecoin could eventually emerge, wrote the HKMA as a part of the-HKD. A Policy and style Perspective discussion paper was discharged on Wednesday. During a situation where the employment of those stablecoins becomes widespread, the role of the domestic currency because the single unit of account might be undermined.
The authority additionally highlighted risks that such stablecoins might undermine payment integrity thanks to operational or money failures or afford larger easy capital flight throughout a financial crisis period, which might undermine the management of central banks over the native economy.
Is the nation looking to introduce a digital currency?
The HKMA 1st declared its plans to check a retail-focused financial organization’s digital currency in June 2021 as a part of its “Fintec 2025” strategy. However, the authority has also found the merits of issuing a wholesale CBDC since 2017.
Retail CBDCs (rCBDCs) are targeted toward the final public and used for everyday transactions. Wholesale CBDCs are issued solely to monetary establishments and aim to create their transactions faster, less expensive, and a lot more secure.
The monetary authority has created no commitment to introducing a digital currency. The original recent discussion paper just invited industry leaders Associate in Nursing customers to supply additional feedback on the potential challenges and advantages of the projected rCBDC.
It additionally asks for feedback on bound style issues like an applicable rCBDC provision mechanism, ability across large-value and retail payment systems, privacy and knowledge protection, legal considerations, personal sector participation and potential use cases.
CBDCs are gaining traction
Across the border in dryland China, the financial organization’s digital currency continues to choose steam. Earlier this month, the People’s Bank of China (PBOC) said it’ll be increasing its digital yuan trial to 6 many cities, adding to the prevailing ten major pilot cities already undergoing trials.
Meanwhile, the Philippines government on Wed declared that it is following its pilot program for a wholesale central bank digital currency, referred to as Project CBDCPh, that it envisions will be used for cross-border payments, equity securities payments and intraday liquidity facilities (ILF).