Mr Eddie Yue had a message for crypto believers during the G20 financial officials’ meeting. The Hong Kong Monetary Authority (HKMA) CEO said that crypto would play a major role in the future of financial systems.
The G20 Summit
The G20 financial forum gathers finance ministers and central bank governors from 19 countries, including the European Union. Also known as the group of twenty, the meeting brings financial officials from the world’s largest economies. The G20 financial forum is convened to address major issues related to the global economy. Issues tackled include financial stability and sustainable development. HKMA’s CEO, Mr Yue, also noted that the technology behind cryptocurrency is adaptable to serve the global financial system. His point of view reinforces HKMA’s approach to cryptocurrencies.
To show its commitment to digital currencies, the HKMA released a statement in January 2022. The statement said they are open to embracing the benefits of financial innovation, such as crypto while recognising the potential risks. HKMA has been more focused on stablecoins and their regulations. The authority has extensively researched CBDCs (Central Bank Digital Currency). Because of this, in a recent discussion paper, HKMA warned that stablecoins could undermine fiat currency. Despite this, they remain optimistic about the future of crypto in global finance.
As cryptocurrencies gained popularity in the past few years, central banks worldwide were concerned about the fate of local currencies. To counter the rise of crypto, central banks embarked on a plan to research, create and test CBDCs. According to the International Monetary Fund (IMF), more than 100 countries are weighing the potential benefits of CBDCs. Out of the G20 nations, 19 are testing and researching CBDC.
Countries such as the Bahamas launched their CBDC in October 2020. The Eastern Caribbean Union also launched a CBDC dubbed the “cash”. Meanwhile, Nigeria became the first African country to launch a CBDC called the “e-Naira”. The financial forum held on July 15 in Bali, Indonesia, comes at a crucial stage when the world is facing financial challenges. Calamities such as inflation and the hiking cost of living that has left more families and communities vulnerable. The Covid-19 pandemic has taken its toll on the global economy. The IMF approximates that the median global GDP (gross domestic product) fell by 3.9% between 2019 and 2020.
Inflation and its impact
Inflation is rising worldwide, and with it, families and countries have difficulty meeting demands. Food prices and the cost of energy globally have hit a record high, driving more people into poverty. The United Nations Food and Agricultural Organization (FAO) reported that global food prices had increased by 12.6%. According to FAO, the price of cereals had the highest rise, with the cereal price index hiking by 17.9%.
With rising inflation, the value of many currencies worldwide lost value. Due to this, people looked for alternative avenues to store wealth. One such alternative was cryptocurrency. As they sought to address the current global financial challenges, the forum members have hinted at cryptocurrency being crucial in the future of financial systems. This is both a store of value and for easier and seamless transactions.
The G20 summit calls for regulation as a way forward
During the financial summit, the members hinted at regulation as the way forward for cryptocurrency’s sustainable adoption and use. Australia and Hong Kong are the G20 countries at the forefront of championing a standardised crypto regulation framework. During the summit, the Australian central bank governor Philip Lowe pointed out that although CBDCs are a good idea, private cryptocurrencies are the only way forward for the financial system. Mr Lowe said that private crypto might be better than CBDCs but added, “If these tokens are going to be used widely by the community, they will need to be backed by the state or regulated just as we regulate bank deposits.”
Crypto and its supporting framework, the blockchain, are viewed as the future of financial systems worldwide. Meanwhile, there are concerns among G20 financial members regarding regulation. The fall of stablecoins has raised major concerns about the future of crypto and its impact on fiat currency and transactions globally. HKMA’s CEO, Mr Yue, has stated that although crypto will be vital for the future of finance in the world, regulation will help prevent another crypto crash as it is being experienced now.