IMF Finds APAC Leading CBDC Push, Links to Crypto Adoption
In a survey that has wider country coverage in the Asia-Pacific region, the International Monetary Fund (IMF) has found that the Asia-Pacific region is at the forefront of central bank digital currency (CBDC) exploration. Unlike the Bank for International Settlement (BIS) whose latest report covered 81 central banks of which 16 are from the Asia-Pacific region, the IMF says a full 83% of the 36 nations surveyed are either researching, experimenting, or developing CBDCs.
Using a combination of two approaches, the survey questions are complemented with in-depth analysis of 14 individual case studies, two regional multi-country CBDC platforms, and the Pacific Island Countries (PICs) as a group to gain more granular insights from responses to help countries looking to adopt CBDCs.
CBDC development rising in Asia-Pacific
Based on the survey responses, only two countries in the region—India and China—are very likely to issue retail CBDC in the near term, the IMF notes. The push is significant considering that the two countries combined cover more than 37% of the world’s population. Another emerging market that has made rapid progress is Thailand, while several low-income countries (LICs) and PICs, such as Nepal and the Marshall Islands, are looking into research and development.
China has been at the global forefront of experimenting with its e-CNY. The People’s Bank of China (PBoC) has been testing the CBDC since 2019 and has even expanded to cover 23 cities and areas in 2022. A technical test of the cross-border use of the e-CNY is also being conducted in Hong Kong SAR. India plans to issue a retail CBDC in 2023 while Thailand plans to start testing in Q4 2022 but will have a full launch later. It says India and Thailand are at advanced stages of their CBDC development with a special unit assigned to spearhead their respective projects.
Key drivers of CBDC interest
While some of the countries have built very successful payments systems, they look to using the financial innovation of a CBDC to improve their current frameworks by lowering transaction costs and increasing efficiency as it touches on the variety of key drivers for their interest in CBDCs according to their income group.
“High-income countries are generally more interested in the ability of CBDCs to enhance the efficiency and safety of the payment system as well as to satisfy the growing demand for digital cash/payments,” the report says. “For middle-income countries, apart from payment system efficiency, promoting financial inclusion and financial stability are also important drivers. Regional development was a key driver in countries such as Lao P.D.R. and Nepal, while maintaining monetary sovereignty was important for India. Some drivers are closely interrelated with others: for example, payment stability is integral to financial stability, and demand for digital cash is related to the need to create alternatives for crypto assets.”
CBDCs in APAC linked with crypto
The survey also found that crypto asset adoption in most emerging markets and LICs are in pace with advanced economies in Asia. With several emerging markets and LICs, such as Mongolia, the Philippines, Thailand, and Vietnam, seeing crypto transactions amount to more than 20% of their GDP, the survey finds that more countries are joining the crypto ecosystem. It cites the case of Lao P.D.R. which authorized two licensed crypto asset exchange platforms in January 2022.