In this paper, we present an in-depth analysis of Central Bank Digital Currencies (CBDCs), focusing on their definition, purpose, design considerations and recent developments. We also delve into the potential advantages of CBDCs for Asia, such as enhancing convenience, precisely quantifying economic metrics, managing anonymity, catalyzing innovation, and promoting financial inclusion. Moreover, we examine how CBDCs can fortify monetary and fiscal policies, ensure safe distribution, reduce costs and combat corruption. We also address the risks associated with CBDC adoption in Asia and explore potential outcomes such as substitution effects, valuation fluctuations, and foreign currency dependence, while highlighting the importance of managing financial imbalances, holdings concentration and public apprehension toward digital currencies.
Citation: David Kuo Chuen Lee, Chia Mei Shih, Jincheng Zheng. Asian CBDCs on the rise: An in-depth analysis of developments and implications[J]. Quantitative Finance and Economics, 2023, 7(4): 665-696. doi: 10.3934/QFE.2023032
In this paper, we present an in-depth analysis of Central Bank Digital Currencies (CBDCs), focusing on their definition, purpose, design considerations and recent developments. We also delve into the potential advantages of CBDCs for Asia, such as enhancing convenience, precisely quantifying economic metrics, managing anonymity, catalyzing innovation, and promoting financial inclusion. Moreover, we examine how CBDCs can fortify monetary and fiscal policies, ensure safe distribution, reduce costs and combat corruption. We also address the risks associated with CBDC adoption in Asia and explore potential outcomes such as substitution effects, valuation fluctuations, and foreign currency dependence, while highlighting the importance of managing financial imbalances, holdings concentration and public apprehension toward digital currencies.
| [1] | Allen F (2000) Financial Structure and Financial Crisis. Manila: Asian Development Bank. Available from: https://www.adb.org/sites/default/files/publication/157203/adbi-rp10.pdf. |
| [2] | Asia Digital Bank (ADB). 2023. Recent Central Bank Digital Currency Developments in Asia and Their Implications. Asian Development Bank. https://www.adb.org/publications/central-bank-digital-currency-developments-asia-implications |
| [3] | Auer R, Böhme R (2020) CBDC Architectures, the Financial System, and the Central Bank of the Future. Available from: https://cepr.org/voxeu/columns/cbdc-architectures-financial-system-and-central-bank-future. |
| [4] | Auer R, Cornelli G, Frost J (2020) Rise of the Central Bank Digital Currencies: Drivers, Approaches and Technologies. BIS Working Papers. no. 880. Basel. Available from: https://www.bis.org/publ/work880.pdf. |
| [5] | Bank of Canada (2018) Should the Central Bank Issue E-Money. Working paper. Ottawa. Available from: https://www.bankofcanada.ca/wp-content/uploads/2018/12/swp2018-58.pdf. |
| [6] | Bech ML, Faruqui U, Shirakami T (2020) Payments Without Borders. BIS Q Rev Available from: https://www.bis.org/publ/qtrpdf/r_qt2003h.htm. |
| [7] | BIS (2018b) Central Bank Digital Currencies. Basel: BIS. Available from: https://www.bis.org/cpmi/publ/d174.pdf. |
| [8] | BIS (2000) Survey of Electronic Money Developments. CPMI Papers No. 38. Committee on Payments and Market Infrastructures. Basel. Available from: https://www.bis.org/cpmi/publ/d38.htm#: ~: text = Electronic%20money%20products%20are%20defined, device%20in%20the%20consumer's%20possession. & text = A%20number%20of%20publications%20relating, the%20auspices%20of%20the%20BIS. |
| [9] | BIS (2020a) Central Bank Digital Currencies: Foundation Principles and Core Features. Report no. 1 in a series of collaborations from a group of central banks. Basel: BIS. Available from: https://www.bis.org/publ/othp33.pdf. |
| [10] | BIS (2020c) The Technology of Retail Central Bank Digital Currency. BIS Quarterly Review. Basel. Available from: https://www.bis.org/publ/qtrpdf/r_qt2003j.htm. |
| [11] | BIS (2022) CBDC and its associated motivations and challenges – Saudi Central Bank. Chrome Browser. chrome-extension: //efaidnbmnnnibpcajpcglclefindmkaj/ Available from: https://www.bis.org/publ/bppdf/bispap123_u.pdf. |
| [12] | Boar B, Wehrli A (2021) Ready, Steady, Go? – Results of the Third BIS Survey on Central Bank Digital Currency. BIS Working Paper. No. 114. Available from: https://www.bis.org/publ/bppdf/bispap114.htm. |
| [13] | Boar B, Holden H, Wadsworth A (2020) Impending Arrival – A Sequel to the Survey on Central Bank Digital Currency. BIS Working paper. No. 107. Available from: https://www.bis.org/publ/bppdf/bispap107.htm. |
| [14] | Board of Governors of the Federal Reserve System (2022) Money and Payments: The U.S. Dollar in the Age of Digital Transformation. Chrome Browser. chrome-extension: //efaidnbmnnnibpcajpcglclefindmkaj/ Available from: https://www.federalreserve.gov/publications/files/money-and-payments-20220120.pdf. |
| [15] | Clifford J (2019) Intro to Blockchain: UTXO vs Account Based. 20 September. Available from: https://medium.com/@jcliff/intro-to-blockchain-utxo-vs-account-based-89b9a01cd4f5. |
| [16] | CPMI (2020) Enhancing Cross-Border Payments: Building Blocks of a Global Roadmap. Stage 2 report to G20. BIS, Basel. |
| [17] | European Parliament (2019) The Future of Money. Brussels: European Union. Available from: https://www.europarl.europa.eu/cmsdata/190218/IPOL_STU(2019)642364_EN-original.pdf. |
| [18] | Falempin L (2020) What Does COVID-19 Mean for Central Bank Digital Currencies (CBDCs)? Tokeny. 14 May. Available from: https://tokeny.com/what-does-covid-19-mean-for-central-bank-digital-currencies/. |
| [19] | G20 (2021) Central Bank Digital Currencies for Cross-Border Payments. July 2021. Report to the G20. Available from: https://www.riksbank.se/globalassets/media/nyheter--pressmeddelanden/nyheter/2021/report-to-the-g20-central-bank-digital-currencies-for-cross-boarder-payments.pdf. |
| [20] | G20 (2022) Options for Access to and Interoperability of CBDCs for Cross-Border Payments. |
| [21] | Report to the G20 (2022) Available from: https://www.riksbank.se/globalassets/media/nyhete-pressmeddelanden/nyheter/2022/rapport-options-for-access-to-and-interoperability-of-cbdcs-for-cross-border-payments.pdf. |
| [22] | GAO C (2022) The significance and impact of DCEP issuance. Institute of Internet Industry, Tsinghua University.[In Chinese] Available from: http://www.iii.tsinghua.edu.cn/info/1059/2344.htm. |
| [23] | HKMA (2021b) Joint Statement on the Multiple Central Bank Digital Currency (m-CBDC) Bridge Project. Press release. 23 February. Available from: https://www.hkma.gov.hk/eng/news-and-media/press-releases/2021/02/20210223-3/. |
| [24] | IMF (2020) Casting Light on Central Bank Digital Currencies. IMF Staff Discussion Note. Washington, DC. Available from: https://www.imf.org/en/Publications/Staff-Discussion-Notes/Issues/2018/11/13/Casting-Light-on-Central-Bank-Digital-Currencies-46233. |
| [25] | IMF (2022) Towards Central Bank Digital Currencies in Asia and the Pacific: Results of a Regional Survey. IMF. Retrieved September 18, 2023. Available from: https://www.imf.org/en/Publications/fintech-notes/Issues/2022/09/27/Towards-Central-Bank-Digital-Currencies-in-Asia-and-the-Pacific-Results-of-a-Regional-Survey-523914. |
| [26] | Lee D, Teo E (2020) The New Money: The Utility of Cryptocurrencies and the Need for a New Monetary Policy. Disintermediation Economics, 111–172. Available from: https://papers.ssrn.com/sol3/papers.cfm?abstract_id = 3608752 |
| [27] | Mancini Griffoli T, Martinez Peria MS, et al. (2018) Casting Light on Central Bank Digital Currencies. IMF. Retrieved November 30, 2023. Available from: https://www.imf.org/en/Publications/Staff-Discussion-Notes/Issues/2018/11/13/Casting-Light-on-Central-Bank-Digital-Currencies-46233. |
| [28] | MAS & Bank of Canada (2019) Jasper - Ubin Design Paper. Enabling Cross-Border High ValueTransfer Using Distributed Ledger Technologies: Monetary Authority of Singapore. chrome-extension: //efaidnbmnnnibpcajpcglclefindmkaj/https://www.mas.gov.sg/-/media/Jasper-Ubin-Design-Paper.pdf. |
| [29] | McKie S (2018) Blockchain Communities and Their Emergent Governance: Thoughts on Legitimacy and Narratives. Amentum. 19 November. Available from: https://medium.com/amentum/blockchain-communities-and-their-emergent-governance-cfe5627dcf52. |
| [30] | Menon R (2023) Shaping the Financial Ecosystem of the Future—Speech by Mr Ravi Menon, Managing Director, Monetary Authority of Singapore, at the Singapore FinTech Festival 2023 on 16 November 2023. Retrieved November 29, 2023. Available from: https://www.mas.gov.sg/news/speeches/2023/shaping-the-financial-ecosystem-of-the-future. |
| [31] | Paper News (2023) Digital RMB SIM card hard wallet function will be launched: support no electricity payment, payment only touch.[In Chinese] Retrieved September 19, 2023. Available from: https://m.thepaper.cn/newsDetail_forward_23799275. |
| [32] | Pei S (2021) Building an Integrated Digital Economy: How Asia Can Continue to Thrive in the Post-Pandemic Era. ThinkChina. 16 February. Available from: https://www.thinkchina.sg/building-integrated-digital-economy-how-asia-can-continue-thrive-post-pandemic-era. |
| [33] | People's Bank of China (PBOC) (2021) Progress of Research & Development of E-CNY in China. Working Group on E-CNY Research and Development. Available from: http://www.pbc.gov.cn/en/3688110/3688172/4157443/4293696/2021071614584691871.pdf. |
| [34] | SWIFT (2015) The Global Adoption of Real-Time Retail Payments Systems (RT-RPS). White paper, 15. Available from: https://www.swift.com/sites/default/files/documents/swift_payments_whitepaper_realtimepayments.pdf. |
| [35] | Yao Q (2018) Experimental Study on Prototype System of Central Bank Digital Currency. Available from: http://www.jos.org.cn/josen/article/pdf/5595. |
 QFE-07-04-032-s001.pdf |
 |
David Kuo Chuen Lee, Chia Mei Shih, Jincheng Zheng. Asian CBDCs on the rise: An in-depth analysis of developments and implications[J]. Quantitative Finance and Economics, 2023, 7(4): 665-696. doi: 10.3934/QFE.2023032
DownLoad: