The future of money is digital (but not Bitcoin)

Asia is quickly becoming the regional leader in the development of digital currencies. And this is happening across the spectrum of financial services: from developing economies promoting financial inclusion to sophisticated financial centers seeking to become global hubs.

In Indonesia, the central bank Bank Indonesia (BI) announced last week it would issue a central bank digital currency. The reasons include financial inclusion and for its monetary policy to be transmitted more effectively through the economy.

Indonesia is a huge country of over 270 million people, yet the World Bank estimates that only 40% of adults actually have a physical bank account.

At the same time, 75% of Indonesians have smartphones, so this presents itself as a much better strategy to promote financial inclusion than the traditional banking system.

Digitize tax leverage

BI’s statement last week following its Governing Council meeting showed a very different monetary policy than other central banks.

The central bank kept official interest rates at 3.5% because it worried about the impact on the rupee: lower rates would weaken the rupee in global currency markets, undermine confidence in the rupee. economy and would encourage foreigners to withdraw their money from the country.

The decision on the exchange rate was motivated entirely by external considerations. Nationally, BI wants to stimulate the economy and help spur recovery from the pandemic, and its basic policy for doing so is the introduction of a digital currency, as well as a mandate to reduce interest rates. national credit cards.

Together, these measures will make local money cheaper, but the switch to digital currency will make money accessible to more people without a bank account and help those funds flow faster throughout the economy. . In its announcement, the central bank noted that digital payments had increased by 60% in the past year, in part due to the pandemic.

FinTechs Prepared Consumers

This is not an example of a central bank but think of the phenomena of Grab, which started life as a ridesharing app in Singapore in 2012 and has now expanded to around 30 countries in the region.

Grab is making headlines for its upcoming $ 40 billion NASDAQ stock float, but to most Southeast Asian people, it’s best known as the most common rideshare service. It has developed into a “super app” for paying for food delivery, but also with wider use as a digital wallet.

Grab, and also Gojek in Indonesia, have transformed into digital payment ecosystems that rub shoulders with the traditional banking system, and which also find interest within the system.

In 2019, Thailand Kasikorn Bank has partnered with Grab and launched an electronic wallet for unbanked customers called GrabPay by KBank.

Based in indonesia Jago Bank last year became the country’s fourth publicly traded bank after Gojek’s investments, and plans to partner with Gojek to integrate its financial services on the company’s platform.

It is with these services in mind that BI announced its intention to launch a digital currency, both trying to prevent the adoption of cryptocurrencies that exist outside the system and also researching new strategies. financial inclusion.

Move up the value chain

Not far geographically, but at the other end of the spectrum in terms of sophistication, is the Digital exchange launched in December of last year by Singapore’s leading bank DBS.

Backed by the Singapore Stock Exchange, DDEx was created to facilitate trading between four cryptocurrencies, including Bitcoin, XRP, Ether, and Bitcoin cash, and four fiat currencies, such as HKD, JPY, USD, and SGD. .

It leverages blockchain technology to provide a fundraising ecosystem through asset tokenization and secondary trading of digital assets.

This week, DBS issued and valued SGD 15 million bond which is now tradable on the DDEx, leading the way with a proof of concept that could pave the way for something unheard of not long ago: companies issuing debt in cryptocurrencies.

In this move, Singapore is looking more to gain the upper hand over other financial centers and establish itself as a digital currency clearinghouse and center of financial innovation.

It’s almost the polar opposite of promoting financial inclusion, but the two initiatives have one thing in common: Money goes digital and there’s no way to stop it.

Lachlan Colquhoun is the Australian and New Zealand correspondent for CDOTrends and HR & DigitalTrends, and the editor-in-chief of NextGen Connectivity. He is fascinated by how businesses reinvent themselves with digital technology and collaborate with others to become whole new organizations. You can reach him at [email protected].

Image credit: iStockphoto / Rasica


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