Digitisation has strengthened the trend toward a cashless system, with central banks exploring the feasibility of central bank digital currencies. Spearheaded by The Bahamas with its release of the sand dollar, many central banks are in various stages of releasing their own cryptocurrencies. Although China is the dominant leader in CBDC development, other central banks are catching up. CBDCs share some of the attributes of popular cryptocurrencies but not all.
People’s Bank of China (PBOC)
Digital currencies are proliferating around the globe, with even the bigtech players such as Facebook jumping in. What about central banks issuing their own central bank digital currencies? Many central banks are weighing the advantages and disadvantages of CBDCs so as to minimize disruption. More recently, six central banks announced that they will work jointly on this issue with support from the BIS, which shows the increasing focus on cross-border implications.
Historically, China has been relatively closed to foreign capital, frustrating would-be investors, but a broader, more progressive mindset alongside worryingly deteriorating economic conditions are prompting it to open the gates to outside investors. Seeing the advantages of increased international integration, China’s authorities are taking constructive actions to increase access for foreign investors to China’s financial sector—all while keeping a watchful eye on the implications for the country’s financial stability.