China's central bank is working with several monetary authorities, including the Hong Kong Monetary Authority (HKMA), to further develop central bank digital currencies (CBDCs) globally, said the People's Bank of China (PBOC) on Monday.

"It is hoped that such cooperation will better serve the needs of the international and domestic markets and help consolidate Hong Kong's status as an international financial center," said Yi Gang, governor of the PBOC, during the Hong Kong FinTech Week 2022 on Monday.

"Going forward, we are ready to strengthen cooperation with monetary authorities and international institutions on CBDC."

The development of CBDC has been gaining momentum in recent years. The latest survey of 81 central banks showed that the COVID-19 pandemic and the emergence of cryptocurrencies have accelerated the work on CBDCs, according to a paper published by the Bank for International Settlements (BIS). 

The BIS paper showed more than two-thirds of central banks are likely to issue a retail CBDC in the short or medium term, and more than a quarter of them are now developing or running concrete pilots.

PBOC, HKMA, as well as the central banks of Thailand and the United Arab Emirates worked with BIS to successfully conduct the largest cross-border transactions to date after entering the pilot phase in September, using the mBridge platform.

However, Yi pointed out that there are still some problems worthy of attention in terms of the practical application of CBDCs. He said among them, privacy protection is one of the most important issues.

Yi stressed that PBOC will continue to provide physical renminbi cash services to fully meet public demand, while at the same he stressed that the PBOC needs to strike a precise balance between protecting individual privacy and fighting illegal activities.

(Cover photo via CFP)