HSBC working with 8 countries in backing CBDCs

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Banking giant HSBC is supportive of central bank digital currencies and is already working with central banks in eight countries to advance their plans, according to a company insight article published this week.

HSBC Group CEO Noel Quinn said the bank was working with central banks in the United Kingdom, France, Canada, Singapore, China, Hong Kong, Thailand, and the United Arab Emirates (UAE) to explore plans for digital currencies, which he said should fuel innovation across the financial sector.

In the article, Quinn struck a positive note about CBDCs and how the technology could be used by governments in issuing digital currencies. In particular, he spoke about the reduced cash handling costs in switching to digital currencies rather than cash, which would lead to lower costs and more efficient payments.

Quinn also highlighted the speed of transactions, as well as the ability to conduct atomic transactions, which would lower the costs of bonds while helping governments and central banks achieve wider monetary policy aims.

The comments align with similar remarks from the head of the Bank for International Settlements (BIS), Benoît Cœuré, who sounded an optimistic note about CBDCs and their role in the financial systems of the future in a speech earlier this month.

“The financial system is shifting under our feet…the time has passed for central banks to get going,” Cœuré said.

In his article, Quinn notes HSBC preferred a hybrid model for CBDCs, which relies on central banks and commercial banks working in tandem to deliver the currency.

“HSBC believes a hybrid model – sometimes called a two-tier model because the CBDC itself is a claim against the central bank but commercial banks provide the payment services and account management activity – is by far the best design option.”

The comments could indicate a possible direction of travel for the central banks currently working with HSBC in shaping their own future policy positions.

To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.

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