CBDC: China and Singapore compare notes at WEF
- Singapore and China suggest interoperability of their CBDC projects.
- Digital yuan will not compete against the US Dollars.
- Digital currencies could pose a sovereignty risk.
Two Asian countries have offered an insight into how a central bank digital currency (CBDC) future might be as they are suggesting an interoperability deal between them. These countries are Singapore and China.
China Digital Yuan won’t compete with the US Dollars
In a virtual World Economic Forum (WEF) moderated by Micheal Casey of CoinDesk, China’s National Institute of Financial Research (NIFR), Zhu Min, said that the market would largely determine the future of the country’s digital yuan. He went on to add that payment systems, capital flows, and currency exchange across the world would influence it.
The NIFR Chairman was also quick to point out that the currency’s future also depends on agreements between governments. Using Singapore as an example, he said if the country’s authorities want to have the Chinese Digital Yuan moving into the country, the countries would have to sign a deal on the workings.
At one time, Zhu was a former deputy governor of the apex bank in China, was quick to dismiss any words of competition between the Chinese digital yuan and the US dollars. According to him, he said he doesn’t think “the (CBDC) is moving in that direction.”
Digital currency poses sovereignty risk
Tharman Shanmugaratnam, the chairman of the Monetary Authority of Singapore, was also a WEF panel member. He said the available payment systems show how the different central banks of the world were collaborating. He added that comparing this sector to other international affairs issues would prove that the sector was working just fine.
Shanmugaratnam also highlighted one challenge that was being faced by emerging countries in the world. According to him, at the slightest hint of trouble, people were quick to always switch to the American Dollars, which creates an issue of sovereign risk. This would become more pronounced with the development of a digital currency as it would be a lot easier and faster to switch up.