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CommentFebruary 17 2021

Asia’s central banks seek to reassert control with CBDCs

Implementation of central bank digital currencies by Cambodia and China may help them achieve greater economic clout on world stage.
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Asia’s central banks seek to reassert control with CBDCs

Asia’s central banks have forged ahead of the rest of the world in the development of central bank digital currencies (CBDCs). Unlike the digital currencies already in circulation, which have been developed by private companies, these originate from the central bank themselves. As well as bringing legitimacy to a new payment method, CBDCs are also seen as a way to take back control over their fiat currencies. 

The National Bank of Cambodia rolled out its CBDC during 2020. For a country with a majority unbanked population and a large diaspora sending money back home, the country had to overcome many challenges to move to a digital economy. With the release of the digital riel, called Bakong, the hope is to bring more people into the formal banking sphere and provide a cheaper and safer way for Cambodia’s overseas workers to send remittances.

China has long-harboured ambitions for making the renminbi a global currency

There is also the upside of promoting the use of the digital riel. The US dollar is still the most used currency, meaning the central bank misses out on oversight — moving to the CBDC would rectify that. 

Challenging the dollar

Meanwhile, the People’s Bank of China has made great progress in the implementation of its digital currency, the e-yuan. The bank has trialled its use of in several cities, distributing low amounts of the currency among residents, with the aim of making it widely used in time for the Beijing 2022 Winter Olympics.

Notably, the country’s online retailers have also shown an interest in the CBDC, with JD.com taking part in the trial period. This is significant as it demonstrates the digital currency’s usability and also makes inroads into the dominance of leading mobile payments providers. 

China has long-harboured ambitions for making the renminbi a global currency, encouraged by its inclusion in the special drawing rights basket in 2016. Despite multiple attempts in the past to foster greater use in trade, it has yet failed to dent the dominance of the US dollar and the euro. However, with a digital currency that can be more freely accessed across borders — and some countries moving away from using the US dollar — this could be the opportunity that China has been waiting for.

A feature of about China and Cambodia's efforts to develop central bank digital currencies is in the March issue of The Banker. 

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