International interoperability will become the cornerstone of the CBDC race as it goes forward, according to Douglas Arner, director at Asian Institute of International Financial Law at the University of Hong Kong.
Speaking at the Unitize blockchain conference earlier today, Arner argued that the interconnections between different global economic systems will become “one of the biggest challenges — and one of the biggest opportunities” as more countries are becoming involved in CBDC projects across the globe.
In Arner’s view, the Chinese financial system already has some predispositions for the cross-border adoption of the upcoming digital yuan project, like the renminbi swap lines which China has established with dozens of countries worldwide over the past few years:
“If we think of the Chinese [CBDC] proposal at the moment, it is largely limited to operating within the context of the physical and electronic borders. But one can imagine how in the context of those electronic borders if one integrates the system with, say, the RMB swap lines that are engaged in a range of different countries, that sort of RMB electronic area can be expanded outside.”
US, EU and China are poised to have the biggest impact
Additionally, Arner outlined three financial institutions who seem to have most leverage in the intensifying CBDC race, which he referred to as “major currency-issuing central banks”: the Fed Reserve, People’s Bank of China and the European Central Bank. He elaborated:
“Those are different animals than everything else. What Canada or Sweden or the UK or Singapore, Australia or Saudi Arabia may do is all really interesting and nice, but the rest of the world is not potentially going to be adopting that in the context of large-scale economic or financial transactions.”
Arnern concluded that “there is definitely an element of potential geopolitical — not necessarily competition, but potentially alternatives or even fragmentation going forward.”