Fed Launching Digital Dollar Review This Week, Hong Kong’s Central Bank Publishes Technical Whitepaper on Retail CBDC
Meanwhile, Bank of Japan Governor Haruhiko Kuroda showed concerns towards stablecoins which are “closely linked to the central bank currency,” as they could have “some impact on the financial system.”
The US Federal Reserve is planning to launch a review of the potential benefits and risks of issuing a digital dollar, according to a report by the Wall Street Journal on Monday.
Last week, speaking virtually at the ECB Forum on Central Banking, US Fed Chair Jerome Powell acknowledged that they should not wait too long as “there is a sense of urgency” in digital currencies.
At the same Forum, Bank of Japan Governor Haruhiko Kuroda said it is essential to differentiate between cryptos, stablecoins, and CBDCs.
About stablecoins, Kuroda said, they are “money issued by private banks, but closely linked to the central bank currency so that the value is stable.”
While “stablecoins could have some impact on the financial system,” Kuroda said when it comes to cryptocurrency, he doesn't think “it will have any serious impact on our monetary system.”
Speaking at the forum, Powell agreed with his Japanese colleague that stablecoins could represent a certain threat to the legacy system.
“Stablecoins can be very popular, and they exist mostly outside of the regulatory perimeter,” he said, adding because stablecoins do not come under regulation, the governments have to be careful “as they are public money and they look too much like bank deposits.”
“e-HKD: A Technical Perspective”
Meanwhile, the Hong Kong Monetary Authority (HKMA) released a technical whitepaper on retail central bank digital currency on Monday.
Titled “e-HKD: A technical perspective,” the report notes that they have started a study on the prospect of issuing a retail CBDC in Hong Kong while continuing the collaborative efforts with other central banks on the cross-border application of wholesale CBDC.
This study covers both technical and policy considerations and aims to have its initial view by the mid of next year. Eddie Yue, Chief Executive of the HKMA said,
“The Whitepaper marks the first step of our technical exploration for the e-HKD. The knowledge gained from this research, together with the experience we acquired from other CBDC projects, would help inform further consideration and deliberation on the technical design of the e-HKD.”
The whitepaper talks about a technical architecture that includes a “groundbreaking privacy preservation arrangement” that allows transaction traceability in a privacy-friendly manner.
HKMA is working with the Hong Kong Centre of the BIS Innovation Hub for this retail CBDC.
The central banking institution of Hong Kong is seeking feedback on the research paper and said it would reach out to the academia and industry regarding the problems which involve privacy, interoperability, performance and scalability, cybersecurity, compliance, operational robustness and resilience, and technology-enabled functional capabilities.