In a meeting of central banks executives in Thailand this week, leaders of financial institutions examine the function of central banks in the context of emerging financial technology, more particularly cryptocurrency and other digital currency. The Bank of Thailand (BOT) and the Bank for International Settlements (BIS) are co-hosting the conference.
Eddie Yue, chief executive of the Hong Kong Monetary Authority, Changyong Rhee, governor of the Bank of Korea, Adrian Orr, governor of the Reserve Bank of New Zealand, and Cecilia Skingsley from the Bank for International Settlements participated in a panel discussion on digitalized monetary systems where they tackle the proliferation of digital assets and central bank digital currencies (CBDC) as well as the dangers posed by the new technology.
Blockchain is a decentralized technology, according to Yue. Therefore, it is far more difficult to reduce on-chain hazards. Hence, he pointed out that “We can start with regulating off-chain activities like regulating virtual asset exchanges. Hong Kong will soon introduce not just AML (anti-money laundering) aspect but also investor protection.”
The head of the Hong Kong Monetary Authority spoke on blockchain technology’s breakthroughs, advantages, and potential effects on central banks. According to Yue, stablecoins and CBDCs may eventually provide a more effective and affordable means of conducting transactions. He explained that any new technology comes with some inherent risks, whether they are related to innovation or operational concerns.
He also disclosed that the Hong Kong government is now working on improving regulations on the stablecoin industry that is aligned to related policies of other countries.
In light of recent fiasco in the cryptoverse, Bank of Korea governor Changyong Rhee was not overly hopeful about the future of blockchain and other decentralized ledger technology (DLT), particularly that applied in the financial sector. He expressed his doubts if really there are more to gain of this innovation saying, “I was more positive before, but after seeing the Luna, Terra, and now the FTX issues. I don’t know if we will see the real benefit of this new technology, at least for monetary policy.”