Hong Kong released its discussion paper on Central Bank Digital Currency (CBDCs) and raised concerns against stablecoins adoption.
In the last few years, the Central Bank Digital Currency (CBDCs) concept grabbed huge traction among almost all Central Banks including the US Federal Reserve. At present, almost 80% of central banks are either involved in the development or in research of CBDCs. Currently, around 10, Central Banks are at the final phase of CBDC development.
On 27 April, Hong Kong Monetary Authority (HKMA) published its discussion paper on CBDCs, which includes stablecoins adoption as a threat to the Hong Kong dollar.
In the crypto industry, many people think that the increasing adoption and development of stable coins are forcing the Central banks to work on CBDC. This view is true at some level, as per Hong Kong’s released discussion paper.
“With continued developments in stablecoins, it cannot be ruled out that a popular stable coin may eventually emerge.”
The discussion paper also noted that such stable coin adoption will impact the Hong Kong dollar.
“In a scenario where the use of these stable coins becomes widespread… the role of the domestic currency as the single unit of account could be undermined.”
The discussion paper figured out that Stablecoins based payment methods may have multiple types of risks like payment failure. And also people may use a high amount of funds transactions under critical global economic situations, which is a big hint that the Central Bank may lose its power to control the outflow of funds.
On Central Bank Digital Currency (CBDCs) it is still not clear whether it will launch or not but still through this discussion paper, Bank invited customers and Fintech players to contribute with feedback against the challenges.
It is also a big truth that Central Bank alone cannot do everything because the Central Bank may introduce such things but overall users and middle operators will play a big role in the adoption.