Hong Kong watchdog warns stablecoins could undermine HKD in CBDC paper
The Hong Kong Monetary Authority (HKMA) has warned that stablecoins could undermine the Hong Kong dollar in a just released discussion paper about its retail central bank digital currency, e-HKD.
The HKMA today issued a discussion paper, outlining the policy and design issues involved in the introduction of e-HKD, and encourages the public and industry to participate in the consultation and share their views. Find out more: https://t.co/GndjuZ2Pay pic.twitter.com/hRz2noD0Ps
Many in the crypto industry believe that interest in developing central bank-issued digital currencies has been in response to the rise of private-sector stablecoins. This discussion paper appears to confirm that view.
“With continued developments in stablecoins, it cannot be ruled out that a popular stablecoin may eventually emerge,” wrote the HKMA as part of the “e-HKD: A Policy and Design Perspective” discussion paper released on Wednesday.
The authority also highlighted risks that such stablecoins could undermine payment integrity due to operational or financial failures, or allow for greater ease of capital flight during a financial crisis period, which would undermine the control of central banks over the local economy.
The HKMA first announced its plans to study a retail-focused central bank issued digital currency in June 2021 as part of its “Fintec 2025” strategy, however, the authority has also been studying to merits of issuing a wholesale CBDC since 2017.
Retail CBDCs are targeted toward the general public and used for everyday transactions. Wholesale CBDCs are issued only to financial institutions and are aimed at making their transactions faster, less expensive, and more secure.
The monetary authority has made no commitment to introducing a
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