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Digital Tokens: Who’s Trailblazing Asia’s Development of Central Bank Digital Currencies?

This November, The Fintech Times is looking to broaden the understanding of digital currencies, ranging from blockchain’s use outside of crypto to CBDCs, in an attempt to replace the notion that digital currencies are a synonym for crypto.

In today’s coverage of digital tokens, we’ll be investigating the Central Bank Digital Currency (CBDC) race within Asia to explore who’s falling behind, and who’s coming out on top.

Defined in its simplest and purest form, a CBDC is a digital form of fiat or local currency. It’s an electronic token of a national ledger that can be issued for retail, wholesale, or international payments, and is regulated by a central banking body. And although interest in this contemporary form of digital payment suffers no restrictions in terms of international interest, nowhere is the development of such more prominent than in the APAC region. So, who’s leading Asia’s CBDC race?

Cambodia’s ‘Project Bakong’, which was launched in October 2020 in collaboration with Japan’s Hyperledger Iroha blockchain, stands as the only live example of retail CBDC in Asia.

Unlike other similar initiatives, Project Bakong does not utilise digital native money. Instead, users can make payments through their own reserves of either riel or the US dollar. To achieve this, Cambodians can use either their own telephone numbers or a QR payment system to connect with digital wallets over the blockchain. As of January 2021, Project Bakong had successfully transacted over $20 million via 50,000 users and 20 banks.

Despite the lack of a nationwide rollout, neighbouring China appears to be very much leading the way in the development and adoption of CBDCs. The People’s Bank of China (PBoC) heavily signalled their arrival in the technological landscape, when in April of 2021, it issued the e-CNY, or digital yuan; becoming the very first major economy in the world to do so. Although the e-CNY is issued by the PBoC, it’s distributed by the country’s leading commercial banks and payment platforms. For example, Alipay – which boasts an impressive collection of 1.3 billion users – added the e-CNY to its platform in May of 2021; although the payment option is only currently available to a proportion of certain users as use of the currency continues through its pilot phase.

The e-CNY pilot is currently being trialed across 4 major cities in China; Shenzhen, Chengdu, Suzhou and Xiong’an. And despite these geographical limitations, the PBoC has reported that the e-CNY has successfully completed 70.75 million transactions as of September 2021, an achievement that has been spread across almost 21 million personal wallets and 3.5 million enterprise wallets.

Running a little bit behind its neighbours in the development of CBDCs is Japan. And despite the lack of any official implementation, the Bank of Japan made a statement in April 2021 whereby it announced the commencement of preliminary trials to develop a retail-focussed digital yen; which is expected to run until March 2022.

In an official statement, BoJ said that it would focus on “the basic functions that are core to CBDC as a payment instrument such as issuance, distribution, and redemption.” Although two additional phases of testing are scheduled post the completion of the trial period, the BoJ is still yet to announce any official launch.

The Hong Kong Monetary Authority (HKMA) outlined their intention to strengthen CBDC research in Hong Kong through their Fintech 2025 strategy, which included cross-collaboration with the Hong Kong Centre of the Bank for International Settlements Innovation Hub (BISIH) and the PBoC.

Howard Lee, Deputy Chief Executive, HKMA
Howard Lee, Deputy Chief Executive, HKMA

Under their strategy, the HKMA is undertaking the mBridge project, whereby it will work closely with its aforementioned collaborators to further understand and refine the cross-boarder payment capabilities of the e-CNY, whilst also testing the waters for the introduction of an e-HKD. In a recent statement, Howard Lee, Deputy Chief Executive of the HKMA, said: “The mBridge project builds on our existing strengths and network in the global financial system, and helps keep Hong Kong in the forefront as digitalisation continues. The HKMA would continue to collaborate closely with the BISIH and peer central banks to broaden and deepen the research, which could also contribute to the global exploration for using CBDC to expedite cross-border payments.”

2016’s ‘Project Ubin’ kickstarted the Monetary Authority of Singapore’s (MAS) interest in CBDC development. MAS partnered with JPMorgan and Temasek to finish its fifth testing phase in July of 2020; which incorporated blockchain-based payment tests across 40 institutions.

Following this, Singapore is now undertaking ‘Project Dunbar’, which is developing a common platform for multi-currency CBDC settlements. MAS has also expressed its interest in collaborating with other central bodies, most notably China’s PBoC.

The Bank of Korea is also taking tentative steps towards developing its own form of CBDC. The Bank is currently testing a new form of e-Won within a limited capacity, and two main areas of focus for the trials are functionality and security.

To do this, the Bank is simulating real-world financial services, including mobile payments, money transfers, and fund deposits; however any full-scale rollout of the e-Won appears to remain some way off for the citizens of South Korea.

How has China come up ahead?

When we consider the data available for CBDC development in Asia, it’s clear that out of all the competitors, China is very much coming out ahead. But why is this, and how has China managed to achieve such a feat?

Firstly, the development and adoption of CBDCs has been exacerbated by China’s large unbanked population. According to the recent data of Finbold, around 278 million Chinese citizens remained without access to a bank account as of Q1 2021; equating to roughly 20% of the country’s population. However, this alarming figure is counteracted by China’s large proportion of mobile phone users. As detailed in GSMA’s ‘2021 Mobile Economy’ report, the country supported 992 million mobile users in 2020, penetrating 67% of the total population. This figure is expected to increase to 80% by 2025, when the country is forecast to see 1.2 billion users.

Not only will such an increase facilitate a higher level of mobile banking, but it also cultivates promises for a prosperous future in CBDC adoption. One of the central benefits to CBDCs is that they’re handled and processed through both online and offline mobile devices, and with the forecast of 1.2 billion mobile users by 2025, China is perfectly positioned in terms of CBDC adoption.

When considering more timely developments, China’s recently imposed ban on all cryptocurrency transactions has been interpreted by some as a strategic move to further the reach and promotion of the e-CNY. By completely removing crypto and its permissionless nature, China and the PBoC have the opportunity to fill the gap with their newest digital ledger, whilst also taking a step against private forms of digital currency.

China’s implementation process of the e-CNY has also pointed to the central governing body’s interest in a more regulated approach. The pilot phase offered users the chance to establish a digital wallet for expenses of up to 5,000 RMB using just their mobile number. However, if said users wanted to increase the capability and volume of their wallet, stringent security and identity checks would be required.

One of the most noteworthy ways through which China’s CBDC came out ahead is by the central bank’s involvement in international CBDC development, and especially in the development of neighbouring countries. For example, the PBoC expectedly had a hand in the development of Hong Kong’s e-HKD, and even tested the viability of their own digital currency within the state.

The cross-border capabilities of China’s e-CNY have even been tested further afield. The PBoC recently formed a partnership with the Central Bank of the United Arab Emirates (CBUAE) to test cross-border foreign currency payments under the m-CBDC Bridge initiative. The likes of the HKMA and the Bank of Thailand are also involved in the initiative. This interconnectivity between projects and governing bodies on an international scale has allowed China to test the waters for its new digital currency, whilst also providing an opportunity to size up the competition, and ensure efficient cross-functionality between other blooming digital currency ecosystems. 

With this much wind in their sails, it appears that China’s central banking body is perfectly poised for a successful rollout of their e-CNY digital currency. And what’s more, public enthusiasm towards its adoption also appears to be promising. For instance, trials of the currency have cultivated a largely positive response. A 2020 trial in the Luohu district of Shenzhen granted more than 47,000 people with access to digital freebies that would test the practicality of the CBDC. There were a total of 1.9 million applications to this programme. Each freebie – or ‘red envelopes’ as they were known – gifted 200rmb (roughly around £22 each) to the recipient, and in the short space of a week-long trial, citizens spent the equivalent of 8.8 million yuan spread across 62,000 successful transactions. In addition to this, China’s central banking body also applied for more than 120 patent applications for its official digital currency; more than any other central banking body in the world.

It’s clear that the appetite for China’s CBDC is already proving to be insatiable, and with the arrival of an accessible digital currency into a population that yearns for more financial inclusion, the PBoC and its collaborators very much appear to be able to drive their developments home to success. The real test however is soon to come, as the country’s Central Bank has announced that it is preparing the e-CNY for widespread use at the 2022 Winter Olympics, which is due to be held in Beijing.

Across many of the various live initiatives within Asia’s CBDC development, we’re seeing thorough and comprehensive research being translated into practical experimentation. The region’s central banking bodies have cultivated an opportune and singular environment for this to happen, and when set alongside the cultural and societal need for their implementation, Asia, if they haven’t already felt it, could very soon find themselves leading the world in exactly how to develop and use CBDCs with a positive end result.   


  • Tyler is a Fintech Junior Journalist with specific interests in Online Banking and emerging AI technologies. He began his career writing with a plethora of national and international publications.

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