Editor's note: Matteo Giovannini is a finance professional at the Industrial and Commercial Bank of China in Beijing and a member of the China Task Force at the Italian Ministry of Economic Development. The article reflects the author's views, and not necessarily those of CGTN.

The outbreak of COVID-19 pandemic has unquestionably had repercussions on the economies of countries in every corner of the globe. At the same time, it has accelerated an ongoing process of transformation for a very conservative financial services industry by changing its banking models and promoting an unprecedented digital transformation.

The convergence of interests between finance and technology, the so-called fintech, is now the epicenter of the historical transition from a traditional exchange of physical money, such as coins and notes, to an online and automated form of transaction that utilizes digital currencies as a medium of exchange.

To put that into perspective, nearly 100 countries around the world are currently researching, testing, or distributing Central Bank Digital Currency (CBDC) with China, already emerging as a pioneer in the development and implementation of the so-called future of money.

On June 16, several business media outlets reported that Israel's central bank is cooperating with the Hong Kong Monetary Authority (HKMA) and the Bank of International Settlements' (BIS) Innovation Lab to experiment the viability of a two-tiered retail architecture for central bank digital currency (CBDC). The joint initiative, that has been named Project Sela, is planned to take place in the third quarter and related data will be made public by the end of this year.

The first consideration to be made here is that this move is nothing new for Hong Kong. This is because since March of last year the city, through Project Aurum, has been exploring a two-tier distribution model, in a structure where CBDCs are issued by the central bank to the public through intermediaries such as commercial banks and payment service providers.

Therefore, I see the cooperation with Israel as an incremental step to further expand Project Aurum by including elements of safety and risk management. In particular, by adding an extra layer of security, Project Sela is going to provide protection to two-tiered retail CBDCs against the risk of cyberattacks.

Security represents a fundamental component of electronic payment systems since it can guarantee that transactions are settled in real time and with immediate finality. As a consequence, risk mitigation becomes a strategic and critical component because the affects of security breaches are not limited to payment systems and consumers. They can also have devastating consequences on entire financial markets and economies.

In this context, I believe that a joint project between HKSAR and Israel represents an important step forward for the development of a secure CBDC due to the integration of unique factors that characterize two of the world's most competitive economies. The combination of Hong Kong's expertise in financial and fintech arenas with Israel's reputation as a tech innovator and as a cybersecurity powerhouse could definitely support the implementation of a resilient payment system that enables safe transactions and prevents fraudulent payments.

At the same time, the creation of a secure platform is going to be conducive to building consumers' trust towards an innovative but, for some people, still obscure payment instrument. In this sense, I am strongly convinced that the union of Hong Kong's reputation as "Asia's world city" and Israel's standing as the "start up nation" could provide solid evidence of trust, promoting an efficient mechanism that guarantees a higher level of protection of end user assets and sensitive personal information.

In addition, I am of the opinion that the announced collaboration stresses one more time the key role that Hong Kong is able to play not only in the promotion of the future of finance but also as a place that stands at the forefront of technological innovation for China. In these circumstances, I believe that the Chinese mainland, which has so far proceeded to hand out digital yuan given by lottery, could take an example from Hong Kong's security testing and accelerate its own digital yuan road map. This will lead to the introduction of a structured distribution model that links the People's Bank of China to the retail market through the vast presence on the Chinese territory of state-owned commercial banks.

One last aspect that I think is worth to be noticed is that Project Sela has received the strong support from the BIS Innovation Hub Center in Hong Kong. This is crucial considering the reputation that the BIS, as the oldest global financial institution, provides as a supporter of a stable financial ecosystem. I believe that the active presence of the BIS in this venture represents a clear mark of acceptance and a sign of full recognition for the validity of the project.

Central bankers, politicians, and simple observers, that have for a very long time looked to the West for financial innovation and golden standards, should start to pay more attention to the current dynamics in the Asian continent where two of its most competitive economies are now laying the groundwork of future global standards for transactions in digital currency.

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