China, Singapore Look Ahead to CBDC Future at World Economic Forum

A former deputy governor of the People’s Bank of China compared notes with the chairman of the Monetary Authority of Singapore.

Jan 28, 2021 at 6:42 p.m. UTC
Updated Sep 14, 2021 at 11:02 a.m. UTC

Financial authority figures from China and Singapore offered a glimpse at how the international roadmap for central bank digital currencies (CBDCs) might play out, with the suggestion of an interoperability deal between the nations. 

Moderating a virtual World Economic Forum (WEF) panel on the impact of CBDCs, CoinDesk Chief Content Officer Michael Casey asked what the plan is for the digital yuan in terms of how it fits into China's international strategy.

The future of the digital yuan will largely be decided by the market, said Zhu Min, chairman of China’s National Institute of Financial Research, pointing to the influence of payment systems, capital flows and currency exchange.

“Also, I think it depends on the countries and governments' agreements,” said Zhu. “So, let's say if Singapore was willing to have the Chinese digital currency moving to Singapore and China was willing to accept the Singapore digital currency, maybe the two countries can sign a deal to work on those things.”

On the subject of the internationalization of the renminbi and giving it a great role in commerce, Casey asked if a digital yuan would give China a better opportunity to compete with the U.S. dollar’s primacy as a global reserve currency. 

“Firstly, I don’t think there is a plan,” said Zhu, a former deputy governor of the People’s Bank of China. “Second, I don’t think we are going to use an instrument to compete with the dollar. I don’t think the [CBDC] is moving in that direction.”

Those promoting the idea of a digital dollar, such as former U.S. Commodity Futures Trading Commission Chairman Christopher Giancarlo, have pointed to privacy concerns around a Chinese digital currency. So would this be a viable concern in the context of interoperable, cross-border arrangements?

“I really don’t see that as a big issue,” said Zhu. “Obviously, if you go one step backwards, the internal architecture and also the technical networking paths can be very different. So those issues need to be solved when the market gradually develops.”

Sovereign risk 

Also on the WEF panel, Tharman Shanmugaratnam, chairman of the Monetary Authority of Singapore, said payment systems demonstrate how international central banks and regulators are actively collaborating. 

“By comparison with some other aspects of international affairs, this area is actually working fairly well,” said Shanmugaratnam.

A problem from the traditional world that lingers over these discussions, however, is the risk that some small and emerging countries face around the “dollarization of their economies,” he added.

“Whenever there is a hint of sovereign risk or worries about a central bank, people start switching into dollars,” Shanmugaratnam said. “That traditional risk will become much more pronounced if you have a digital currency, because it will be that much cheaper and faster to switch from domestic currency assets into foreign currency assets. It's an issue that we haven't begun to address.”

The Festival for the Decentralized World
Thursday - Sunday, June 9-12, 2022
Austin, Texas
Save a Seat Now

DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

Trending

1
CoinDesk - Unknown
Panama President Considers Vetoing Crypto Regulation Legislation

The bill was approved during a plenary session of the Legislative Assembly by a 40-0 vote on April 28.

The bill was approved during a plenary session of the Legislative Assembly by a 40-0 vote on April 28.

CoinDesk - Unknown
2
CoinDesk - Unknown
Ryder Ripps, Bored Apes and 'Owning' an NFT

A debate over fair use and copyright in the NFT age ensues.

A debate over fair use and copyright in the NFT age ensues.

CoinDesk - Unknown
3
CoinDesk - Unknown
Sponsor Labels

CoinDesk - Unknown
4
CoinDesk - Unknown
Bitcoin Returns Above $30K, Resistance at $35K

BTC appears oversold, although trading conditions have been choppy over the past few days.

BTC appears oversold, although trading conditions have been choppy over the past few days.

CoinDesk - Unknown