Interoperable digital currencies pushed in APEC
TOKYO, JAPAN—The Financial Task Force of APEC Business Advisory Council (ABAC) is making a big push for central banks to develop digital currencies that will be interoperable or can work seamlessly across 21 Asia-Pacific Economic Cooperation (APEC) countries, thus making trade and financial flows faster and cheaper.
This is shaping up as one of the key priorities of the ABAC Financial Task Force ahead of a crucial meeting to be hosted by the Philippines at NuStar Resort in Cebu on July 27 to July 30 that will finalize policy recommendations to APEC leaders, including the finance ministers.
Julius Caesar Parreñas, senior advisor research division at Daiwa Institute of Research who coordinates the Asia-Pacific Financial Forum and represents ABAC at the APEC Finance Ministers’ Process, named the priorities of the financial task force: digitalization of trade finance, development of interoperable open data systems, improvement of cross border data flow and use of privacy-enhancing technologies for central bank digital currencies (CBDCs) and promotion of financing for transition projects in the energy sector alongside the development of common principles to promote interoperability.
“The current problem of many Asian countries is that if you want to send payment from one jurisdiction to another jurisdiction, you cannot really pay directly in the local currency. For example, if you’re sending a payment from Philippines to Thailand, you can’t go directly into peso-Thai baht payment. We all have to go through the US correspondent banks within the US payment systems,” Parreñas said.
The idea is to allow CBDCs, on a wholesale basis or for big transactions, to enable direct payment without having to go through the US system. This means it will be “cheaper, faster and less complicated,” he told visiting business journalists from the Philippines.
A Filipino financial market expert who has been based here for the last 14 years, Parreñas said the focus would now be to propose common principles to help wholesale CBDCs that will be interoperable in the future.
Interoperability is indeed a common theme that has emerged across the different industries tackled by ABAC, whether it’s green financing, sustainability or financial inclusion, said David Hardoon, CEO of Aboitiz Data Innovation, the Singapore-based data science and artificial intelligence arm of the Aboitiz Group.
A former chief data officer and head of data analytics group at the Monetary Authority of Singapore, Hardoon pointed out that each jurisdiction has different legal structures, policy requirements and regulations to consider.
“While ultimately the end-objectives of them are the same, the mechanisms and the requirements may slightly differ. So one of the recommendations is about how do we achieve interoperability. So in other words, it’s not just about forcing a standard but kind of connectivity,” Hardoon said.
Another recurring theme is modularity, to make the recommendations encompassing as much as possible given the rate and the advancements of technology and the need to provide services and make them inclusive, Hardoon said.
There’s also a need to ensure that recommendations would adhere to various privacy governance and local requirements across jurisdictions, said the ADI official.
“APEC has a long history of 30 to 40 years. G20 (Group of 20 forum for international economic cooperation) is important but still fragile because it’s a very young structure. They don’t have (private sector advocacy) meetings like ABAC,” Takashi Imamura, executive officer at Marubeni Research Institute and alternate ABAC member, told visiting reporters.
“The long term goal is FTAAP (Free Trade Area of the Asia Pacific), which we are still seeking,” the Japanese executive said.
APEC announced in 2006 that it would examine the long-term prospect of FTAAP. Beyond just free trade, this is envisioned to be comprehensive, high quality framework that also addresses “next generation” trade and investment issues.
Every year, ABAC submits a report to APEC leaders that outlines key recommendations focused on regional economic integration. ABAC also engages with ministers, especially those responsible for trade, finance, small and medium enterprises, energy, food security, health and women to address urgent challenges. INQ
