China’s Digital Currency Ripple Effects from the Gulf to Singapore

China is at the forefront of the application of digital technologies in the financial sector – in securing benefits, regulating risks and in experimentation.  Private companies Alibaba and Tencent spearheaded the introduction of e-payments within China but are now subject to increasing regulation.  At the same time, Beijing has moved to clamp down on cryptocurrencies such as bitcoin mining and trading for reasons of financial stability, control and energy consumption.

In parallel, China has piloted the introduction of its own Central Bank Digital Currency (CBDC), known as the e-RMB, e-CNY or DC/EP (digital currency/electronic payment).  This is a pilot that had 261 million individual participants as of January 2022.  The main focus for the e-yuan is domestic, and serves as a component of China’s society-wide digital transformation.

However, the e-CNY is also, in the words of the People’s Bank of China, ‘ready for cross-border use’. China has already launched m-CBDC Bridge, a project on cross-border digital currency payment with the United Arab Emirates (UAE), Hong Kong and Thailand. The Monetary Authority of Singapore (MAS) estimates that using the e-CNY between Singapore and China could bring savings of 3-5% of Singapore’s gross domestic product. The MAS is assessing the economic case for a retail CBDC in Singapore and its potential implications for financial stability and monetary policy.

Worldwide, 90 countries are exploring their own digital currencies including the UAE and Kingdom of Saudi Arabia. There are ambitious plans to accelerate fintech transformation across the Gulf.

At the same time, Fed Chairman Jerome Powell has stated that he does not believe that China’s early adoption of a digital currency threatens the dollar’s role as the main global reserve currency.  The UK’s House of Lords has concluded that CBDCs may be ‘a solution in search of a problem’ and are fraught with risks.

In this seminar, three experts will explore the potential economic and geopolitical impact of China’s initiatives in digital finance and the opportunities, risks and choices for countries in the Middle East.  The seminar will address questions, including:

• Who benefits from the greater use of digital currencies and what are the risks?
• Will the e-CNY re-energise the internationalisation of the renminbi?
• Does it matter if the e-US dollar and e-Euro only come into being in 10 years’ time?
• Do China’s controls on cryptocurrencies matter for the rest of the world?
• Does every country need its own digital currency and why?
• What role will digital currencies play in Islamic finance and its institutions?

This public talk was conducted online via Zoom on Tuesday, 7 June 2022, from 5.00 pm to 6.30 pm (SGT). For more information, click here.