Standard Chartered, a British multinational bank, and PwC China have collaborated to produce a white paper exploring the applications of Central Bank Digital Currency in China’s Greater Bay Area (GBA). Comprising Guangdong Province, Hong Kong, and Macao, the GBA present a unique case study due to its use of multiple currencies across various jurisdictions. The white paper emphasizes the importance of programmability in CBDCs and highlights the potential benefits of adopting such a system in the region.
Greater Bay Area’s Unique Landscape and Cross-Border Trade Potential
The Greater Bay Area, consisting of 11 megalopolises, stands as an ideal region for researching and implementing a central bank digital currency due to its diverse economic landscape and significant cross-border trade. With Macao utilizing the pataca, Hong Kong using the Hong Kong dollar, and China relying on the yuan, the region witnessed approximately 3.8 trillion yuan (US$535 billion) in cross-border trade in 2021 alone, underscoring the importance of streamlining financial transactions and enhancing cross-jurisdictional cooperation.
The Greater Bay Area’s unique landscape, comprising a cluster of 11 major cities, provides a rich environment for exploring the potential of a Central Bank Digital Currency (CBDC). The region’s diverse economic activities and substantial cross-border trade further amplify the significance of implementing a CBDC. In 2021, the total value of cross-border trade in the Greater Bay Area reached an impressive 3.8 trillion yuan (equivalent to approximately US$535 billion). This staggering figure underscores the pressing need for efficient financial transaction processes and increased collaboration among jurisdictions to facilitate seamless cross-border transactions.
The Advantages of Programmable CBDCs
The joint white paper by Standard Chartered and PwC China highlights the numerous advantages offered by programmable CBDCs, especially within the context of the Greater Bay Area. Programmability provides a foundational framework for the interaction of different central bank digital currencies in cross-border commercial scenarios, paving the way for seamless financial transactions and improved efficiency.
The report emphasizes the potential use cases of programmable CBDCs within the GBA, including cross-border trade implementation, supply chain invoice settlement, and added currency flexibility. Retailers can leverage a single multicurrency wallet to streamline service and loyalty programs, benefiting both businesses and customers. By introducing CBDC-based loyalty programs, smaller retailers can enhance their offerings and incentivize consumers to participate. Additionally, payment service providers can utilize smart contracts for Know Your Customer (KYC) processes, simplifying customer onboarding and enhancing security.
Hong Kong’s CBDC Pilot Project and the Path to Widespread Adoption
The white paper’s recommendations align with ongoing efforts in Hong Kong, where the Monetary Authority recently launched an e-HKD CBDC pilot project. This initiative explores various use cases, including tokenization, and sets the stage for wider adoption of programmable CBDCs in the GBA.
Widespread commercial adoption of programmable CBDCs necessitates collaborative efforts between industry participants to better serve their customers. Standard Chartered and PwC China’s white paper serves as a call to action, urging stakeholders in the financial sector to embrace the potential of CBDCs and work collectively towards integrating them into existing systems.
Conclusion
Standard Chartered and PwC China’s white paper on programmable CBDCs in the Greater Bay Area highlights the unique challenges and opportunities presented by the region’s multi-currency landscape. The report underlines the advantages of programmable CBDCs, emphasizing their potential in facilitating cross-border trade, enhancing loyalty programs, and streamlining payment processes. By focusing on the Greater Bay Area as a test case, the white paper offers insights that can guide the implementation of CBDCs in other jurisdictions facing similar challenges.
