HONG KONG: The Bank of Thailand and Hong Kong’s central bank said on Wednesday that they had moved a step closer to issuing digital currencies that could be used to make payments between the two countries far more efficiently than at present.
A report published by the two central banks confirmed the technical feasibility of using a central bank digital currency (CBDC) to make cross border payments more efficient, cheaper, lower risk and more transparent.
There is no timeframe yet for a real transaction, however, Colin Pou, executive director at the Hong Kong Monetary Authority (HKMA), told a media briefing.
Many central banks around the world are looking into building CBDCs, traditional money but in digital form. They would differ from cryptocurrencies like bitcoin which are produced by solving complex math puzzles, and governed by disparate online communities instead of a centralised body.
Most projects are still in the very early stages, though the People’s Bank of China is rumoured to have progressed the furthest in developing a CBDC to be used to improve payments within China.
Pou said the HKMA had earlier concluded that there was no reason to use a CBDC for payments in Hong Kong, as these were already very efficient.
However, he said CBDCs could be used to streamline cross border payments, which he said are currently inefficient and costly.
Previous studies have focused on the technical challenges of using CBDCs for cross border payments, Wednesday's report concentrated on practical issues like foreign exchange pricing and the impact on liquidity.
The HKMA and Bank of Thailand will continue to work together on this joint initiative, which Pou said could be expanded to include other central banks, or linked with other separate initiatives.
The Monetary Authority of Singapore and the Bank of Canada last year jointly explored the technical aspects of using CBDCs for cross border payments.
The central banks of Britain, the euro zone, Japan, Sweden and Switzerland on Tuesday said were looking at the case for issuing their own digital currencies.