The space race of central bank-issued digital currencies in Asia: What lessons can Europe learn?

The Institute for Foreign Affairs and Trade (IFAT) hosted an online event entitled “The space race of central bank-issued digital currencies in Asia: What lessons can Europe learn?”. The distinguished experts were Dániel Nagy and Ádám István Retkes who are both External CBDC Advisors at CBDC Think Tank Budapest. The discussion was moderated by Viktor Eszterhai PhD, Senior Research Fellow at IFAT.

In his presentation, István Ádám Retkes defined what can be considered as Central Bank Digital Currency (CBDC) and explained the difference between the correspondent banking system and CBDC-based systems. His presentation pointed out that correspondent banking systems are typically slower, more expensive, and less reliable, i.e. not efficient enough. He, therefore, argued that digital central bank money will trigger a revolution in the financial world, posing a serious challenge to the existing correspondent banking system.

Dániel Nagy underlined that the majority of central banks are all involved in the process of developing digital central bank money at some level. Developing countries and Asia, in particular, are at the forefront of this process. Typically, they place a special emphasis on research and share knowledge and resources through transnational partnerships such as the Dunbar Project. In response to questions from the moderator and the audience, Daniel Nagy underlined that the developing countries’ outstanding interest in CBDCs is due to the crises they have experienced, such as the Asian financial crisis of 1997 and the global financial crisis of 2008. These had led countries to rethink their dependence on the dollar-based financial system and to regain control over capital flows. This desire has been met by the crypto technology revolution, the results of which have been used by central banks to develop similar methods. In terms of sanctions, countries under punitive measures could provide a major impetus for development and experimentation, as the financial corridors that technology could create could be able to bypass traditional financial transaction channels.

During the event, speakers placed particular emphasis on the question of what Europe can learn from Asia. The issue of the digital euro was also raised.

For the full recording please click on the link below or visit our YouTube channel!