The rise of digital currencies has sparked global debate — from the surge in cryptocurrencies to the growing momentum behind central bank digital currencies (CBDCs). Questions about how to use them safely, how to regulate their impact, and what role they’ll play in the future of finance are now at the forefront of international economic discourse.
At the Boao Forum for Asia 2023, central bank leaders from around the world gathered to address these pressing issues. Their insights shed light on the evolving landscape of digital money, emphasizing the need for balanced innovation, robust regulation, and long-term financial stability.
Defining Digital Currency: Avoiding a "Winner-Takes-All" Mindset
One of the first hurdles in the digital currency conversation is defining what it actually means. As Zhou Xiaochuan, Vice Chairman of the Boao Forum for Asia and former People's Bank of China governor, pointed out, different stakeholders — from tech developers to financial institutions — often define digital currency through their own lenses.
"There’s been constant debate over whether a digital currency must be blockchain-based, decentralized, or encrypted," Zhou explained. "Some once claimed that only decentralized, blockchain-powered currencies not controlled by central banks could qualify — but those models have encountered serious problems."
Indeed, many so-called “decentralized” systems have revealed vulnerabilities, including security breaches and market manipulation. Over time, such rigid definitions have lost favor.
Zhou cautioned against rushing to declare a single dominant model. "Technology evolves every three to five years," he said. "What seems secure and revolutionary today may face flaws tomorrow." A flexible, inclusive approach to defining digital currency allows room for innovation without locking out alternative solutions.
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Regulation Must Keep Pace with Innovation
As digital assets gain traction, regulators face mounting pressure to protect consumers and maintain systemic stability.
Xuan Changneng, Deputy Governor of the People’s Bank of China, stressed that decentralized cryptocurrencies haven’t solved core issues inherent in traditional fiat systems — and in some cases, have exacerbated them. Most crypto trading occurs on private platforms where rules are set by issuers or exchanges themselves, creating centralized control masked as decentralization.
These platforms often facilitate leveraged trading and currency conversion without adequate oversight, leading to frequent incidents of fraud, market abuse, and misappropriation of user funds.
"Regulatory capacity must keep up," Xuan emphasized. "In the era of digital finance, innovation should not come at the cost of financial stability."
China took early action by banning financial institutions from providing services related to cryptocurrency trading back in 2017. This move helped safeguard investor interests and preserved market order during periods of extreme volatility.
International consensus is also forming. Major economies and global organizations like the IMF and Financial Stability Board are advancing coordinated regulatory frameworks to monitor risks and ensure accountability across borders.
In Indonesia, rapid growth in fintech and e-commerce has driven demand for stronger oversight. Doni Joewono, Deputy Governor of Bank Indonesia, highlighted that effective regulation builds public trust and strengthens financial resilience.
"Better supervision enhances confidence in new financial systems," he said. "It ensures that innovation serves inclusion rather than instability."
Hungarian central banker György Matolcsy echoed this sentiment: "While experimenting with digital currencies, we will inevitably make mistakes. But regulation provides the guardrails necessary for sustainable progress."
He believes CBDCs will ultimately dominate the digital currency space within a well-structured regulatory environment.
Global Momentum Behind Central Bank Digital Currencies
Central banks worldwide are actively exploring or piloting their own digital currencies. These efforts aim to modernize payment systems, expand financial inclusion, and reduce reliance on physical cash.
China’s Digital Yuan: Real-World Integration
China leads in CBDC deployment. By the end of 2022, the outstanding balance of digital RMB in circulation reached 136.1 billion yuan. Unlike speculative cryptocurrencies, the digital yuan functions as legal tender — fully backed by the central bank and integrated into existing monetary policy frameworks.
Crucially, digital yuan transactions are recorded alongside physical cash for statistical and regulatory purposes, enabling unified monitoring and macroeconomic management.
Cambodia’s Bakong: A Model for Financial Inclusion
Cambodia has developed an innovative system called Bakong, built on distributed ledger technology (DLT) and blockchain principles. While not officially labeled a full CBDC, Bakong operates as a hybrid payment infrastructure connecting banks and payment providers.
According to Deputy Governor Chea Serey of the National Bank of Cambodia, Bakong improves interoperability between financial institutions, reduces transaction costs, and promotes financial access in rural areas.
"We eliminate the cost of printing paper money," she noted. "Blockchain enhances security and transparency in every transaction."
The system allows users to link bank accounts to mobile wallets, facilitating instant peer-to-peer transfers and merchant payments — all without relying on foreign payment networks.
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Thailand’s Vision for Retail CBDC
Thailand is advancing its retail-focused CBDC initiative with a goal of enhancing everyday financial usability.
Deputy Governor Mathee Supapongse of the Bank of Thailand outlined plans to broaden distribution channels, encourage innovation, and create diverse use cases — from government disbursements to small business transactions.
Beyond domestic applications, Thailand is researching cross-border payment solutions using CBDCs. Key challenges include reducing remittance costs, improving operational efficiency, and ensuring transparency across jurisdictions.
"Lowering participation barriers increases financial inclusion," Mathee said. "Our aim is to improve citizens’ overall financial well-being through smarter digital infrastructure."
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Frequently Asked Questions (FAQ)
Q: What is the difference between cryptocurrency and CBDC?
A: Cryptocurrencies like Bitcoin are typically decentralized and not issued by governments. In contrast, a central bank digital currency (CBDC) is a digital form of a country’s official currency, issued and regulated by its central bank.
Q: Is digital currency safe to use?
A: Safety depends on the type. CBDCs are considered highly secure due to government backing and regulated infrastructure. However, many private cryptocurrencies carry risks such as price volatility, hacking, and lack of consumer protection.
Q: Can CBDCs replace cash?
A: While CBDCs may reduce reliance on physical cash, most central banks intend for them to coexist with traditional forms of money rather than fully replace them.
Q: How do CBDCs promote financial inclusion?
A: By enabling access via mobile devices and lowering transaction costs, CBDCs can bring unbanked populations into the formal financial system — especially in remote or underserved regions.
Q: Are governments monitoring CBDC transactions?
A: Most CBDC designs balance privacy with regulatory compliance. While transactions may be traceable for anti-money laundering purposes, personal data protection remains a priority.
Q: Will CBDCs work across borders?
A: Cross-border interoperability is a major focus of ongoing research. Projects like mBridge are testing multi-CBDC platforms to facilitate faster, cheaper international payments.
Final Thoughts
The global shift toward digital money is inevitable — but how it unfolds will depend on collaboration between technologists, policymakers, and regulators. As demonstrated by initiatives in China, Cambodia, Thailand, and beyond, central bank digital currencies offer transformative potential when guided by clear objectives: security, inclusivity, efficiency, and stability.
Rather than rushing toward a single dominant model, the world appears to be embracing a pluralistic approach — one where innovation thrives under responsible oversight.