China relies on digital central bank money
Cooperation with the Israeli Central Bank
Focus on cyber security
All major central banks are currently dealing with the topic of digital national currencies. However, currency custodians in Europe and the US are very reluctant to do so and are still debating the pros and cons of CBDC – a version of digital cash that should be available to the public in the same way as the euro or the US dollar. In the opinion of the International Monetary Fund (IMF), it is right for the central banks to proceed cautiously in their preparations for their own digital currencies, because because every economy is different, the central banks have to find their own solutions.
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In contrast, China is stepping up the pace. Market observers also see this as an attempt to attack the US dollar as the world’s leading currency. Whatever the motivation behind it, it is clear that hardly any national digital currency in the world is as advanced as the e-yuan. Since April 2020, the blockchain-based currency has been issued as part of pilot projects in some regions to test its use. And at the 2022 Winter Olympics in China, dedicated e-CNY wallets were easily accessible to users from around the world.
Cooperation with BoI
To gain additional experience, the Hong Kong Monetary Authority (HKMA) is now also cooperating with the Bank of Israel (BoI) and the Bank for International Settlements Innovation Hub (BISIH) Hong Kong Center to test the risks associated with CBDC . Under the test project, which is set to start in the third quarter of 2022 and will be led by the BISIH Hong Kong Centre, a two-tier central bank currency will be issued by central banks and redistributed by financial intermediaries such as banks, according to Bloomberg. According to the Bank of Israel, however, customers should not come into contact with it.
The purpose of the project is in particular to investigate how secure the CBDC is from hacker attacks. That’s why the Central Bank of Israel was chosen as a partner, after all, Israel is one of the world’s leading countries when it comes to cyber security. The Bank of Israel expects CBDC to be “less risky for customers, more liquid, less costly, more competitive and more widely available”.
“Providing an efficient payment system that increases competition in the payments market is one of the key drivers for us to potentially launch a digital shekel – an Israeli CBDC,” Blockchain.News quoted Andrew Abir, deputy governor of the Bank of Israel.
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