Zhou Xiaochuan suggests China and Singapore’s digital currency cooperation should start with retail

By Caixin Global
What’s new: China and Singapore can initially focus on the retail sector when cooperating on central bank digital currencies (CBDCs) and electronic payments, said Zhou Xiaochuan, a former governor of China’s central bank. He added that this would be a comparatively safer and more efficient way of testing out CBDCs.

Zhou made the remarks via video at a Monday meeting in Southwest China’s Chongqing municipality.

Zhou said central banks across the world have different strategies for developing their CBDCs, with some focusing on settlement and payment in financial markets, while some others focus on cross-border remittances. But users have less urgent needs in those fields than in retail payments, Zhou said.

In addition, different governments’ regulations on exchange rates and anti-money laundering would also likely interfere with the convenience of using CBDCs for cross-border payments if they are not used for retail repayments, Zhou said.

What’s the background: A wave of central banks across the world have jumped on the bandwagon to study or test out digital currencies, in order to preserve their countries’ reserve currency status in the face of challenges brought by recent technological developments.

The People’s Bank of China (PBOC) is one of the world’s first major central banks to test out a digital currency. Under Zhou’s leadership, the PBOC started to study and develop the digital yuan in 2014.

In June, Ravi Menon, managing director of the Monetary Authority of Singapore, said (link in Chinese) that it and the PBOC have been discussing landing scenarios for digital currencies, such as the possibility of Chinese tourists using the digital yuan abroad.

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