The Cost of Convenience – Why HK’s Digital Renminbi is Bad News

In 2019, the Hong Kong Monetary Authority (HKMA) launched a joint research project with the Bank of Thailand to investigate cross-boarder payment issues and to find a way to address these issues through the use of central bank digital currencies (CBDCs). The study was, and still is, supported by the G20 international financial community.

Recently, the HKMA announced that the research project had entered its second stage – the official pilot testing of the Digital Renminbi (e-CNY) for cross boarder payments. The team believes that utilization of the e-CNY for cross boarder payments will “bring even greater convenience to Hong Kong and Mainland tourists.”

But, that’s only half the story. Widespread use of e-CNY will also make it easier for the government to track, monitor, and audit every dollar flowing in and out of their ecosystem. And that’s terrifying.

Looking at the bigger picture, normalizing the use of e-CNY for cross boarder payments opens the door to China REQUIRING cross boarder payments to be done using e-CNY. This would mean every entity, individual or corporate, would need to use e-CNY to purchase goods from Chinese manufacturers; as the world’s manufacturing powerhouse, this could displace USD as the international currency of choice and force every country to hold an allocation of e-CNY to do business.

But, making e-payments instant and adding convenience to our e-commerce spending makes it all worth it, right?

It’s irrefutable that instant bank transfers across different banks or platforms, at any time and from anywhere, represents a tremendous leap forward in payment system efficiency and cost reduction. It’s also pretty hard to argue against the convenience Amazon’s Alexa or Google’s Home Mini brings to our everyday lives. But, is it all worth it? Is the privacy we have to give up in consideration worth the increased speed of transactions, is it worth the voice activated playlists and simplified toilet paper orders?

Our privacy is important, and the vast cacophony of lawsuits filed against big tech (whether they be justified or frivolous) is proof that the world cares how our data is used and abused. Whether the HKMA’s project results in a global power shift is anyone’s guess, but it’s clear that there’s more riding on e-CNY’s success than just the elimination of existing transactional pain points.

So, do we know how this story is going to turn out? Nope. But I’m betting it’s going to be one heck of a ride. Let us know your thoughts @StarterNoise.

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