HSBC: CBDCs are critical for financial growth

HSBC might not be a bank advocating cryptocurrency, but the CEO has outlined a pledge to promote central bank digital currency (CBDC) development. As one of the largest European banks with assets of more than $3 trillion USD in its holdings, the bank is influential in the space and the opinion of the CEO could sway others sitting on the fence.

HSBC CEO fuelling CBDC development in the banking industry

Noel Quinn, the CEO of the HSBC Group, wrote an article addressing how digital money can traject financial growth and rally financial innovation. In the letter, he wrote that the banking firm is committed to supporting and developing CBDCs as a complement to cash and currency. Noting that digital banking currencies will be able to offer transparency in finance as part of legal tender will help mitigate risks and reduce the possible dangers and volatility commonly associated with cryptocurrencies.

Moreover, the firm’s CEO beleives that CBDCs can help further the economy with more effective, quicker and more affordable payment options in place to stimulate economic movement.

As per Quinn’s note:

CBDCs could help to spur further economic growth by making payments and settlements more efficient and cheaper. They could also fuel innovation across the financial sector. The near instant nature of CBDC payments is likely to lower the cost of issuing and trading bonds and other securities – and may also help with fiscal and monetary policy objectives by providing a means of making direct transfers to consumers to stimulate demand.”

The need for safety in the adoption of innovative tech in finance

According to Quinn, digital currencies will need to be regulated extensively to mitigate risks as the industry continues to grow across the globe. As a result, any new products and services developed will need to be “safe, efficient and genuinely transformative.” Before adopting the digital currency fully, the concept needs to be tested and piloted to make sure it does not have a negative impact on the credit supply and market activity or risk upsetting a country’s financial stability.

To ensure the risks and reduced and the advantages are enhanced, Quinn pointed out that the model of adoption will lean towards a hybrid one. This means that it will be looking to implement both a central bank digital currency and maintain operations with traditional currencies. According to the firm’s CEO this will help avoid an entire restructure of management infrastructure while making sure innovative design in finance can play a vital role:

“CBDCs should do no harm to monetary and financial stability; must be able to co-exist with cash and other money in a flexible and innovative payments ecosystem; and should promote broader innovation and efficiency in the financial system… If CBDCs can meet the high standards of safety and efficiency that banks always look for from new products and services, then they can bring about positive change for the financial sector and the real economy.”

CBDCs and global interest

HBSC is not the only firm or banking leader to start to consider the role CBDCs can play. As reported, there has been a leap in the interest of CBDCs with more countries testing the concept. According to Google Trends, there has been a volatile global interest in CBDC  as a search term:

As more banks and more countries onboard the products of CBDCs, we might see a healthy rise in how people search and include the digital currencies in their daily lives.

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