What Asia’s leadership in digital currencies means for businesses

With any new technology, it’s worth remembering that use cases can change, and adoption often takes time. Digital currencies generated much early excitement around the potential of Bitcoin and other cryptocurrencies, but the pace of adoption has slowed in recent years.¹ While these new instruments have struggled to gain broad acceptance as payment for goods or services, their potential benefits remain impossible to ignore.

Asia is now playing a leading role in moving digital currencies beyond the novelty stage.

Real-world pilots of Central Bank Digital Currencies (CBDCs) are gaining traction across the region, including in mainland China, Hong Kong and Singapore.² Hong Kong also saw the launch of Asia’s first exchange-traded funds (ETFs) for spot Bitcoin and Ether in April, only months after the first spot Bitcoin ETF launched in the US in January.³

Digital currencies have the potential to redefine the speed, cost and accessibility of financial services everywhere, as well as supporting the development of entirely new financial products, such as tokenisation.⁴

For businesses in Asia, the digitalisation of payments and financial services promises to improve efficiency and unlock new opportunities. There will also be challenges in this evolving sector.

The Asian Development Bank defines a digital currency as any currency that exists only in digital or electronic form. That includes CBDCs, which are issued directly by a central bank as a form of fiat currency, as well as instruments that are issued by a third party, which may or may not be endorsed or regulated by a central authority.⁵

While many proponents of cryptocurrencies, such as Bitcoin, tout their independence from central banks as an advantage, the official backing and stability of CBDCs is important implications for electronic payments.⁶ Thanks to their underlying technology, CBDCs have the potential to dramatically reduce the time and costs of cross-border payments, which makes them highly relevant in supporting international commerce and driving economic growth in Asia.

One of the more advanced cross-border CBDC initiatives globally has its roots in Asia. Initially launched by the Bank of Thailand and the Hong Kong Monetary Authority, Project mBridge aims to use blockchain technology to enable instant payment and settlement across borders and has been expanded to include the Central Bank of the United Arab Emirates, the People's Bank of China and the Bank for International Settlements. In June 2024, the partners announced the transition from a pilot to minimum viable product and confirmed that the Saudi Central Bank is also joining the scheme.⁷ HSBC has supported mBridge as a commercial partner since its inception in 2021.⁸

HSBC is involved in various projects related to CBDCs, tokenised deposits and tokenised assets, showcasing its pioneering efforts in shaping the future of money. For example, we are working with the Hong Kong Monetary Authority on its new wholesale CBDC project, Project Ensemble⁹, advising on the tokenisation of deposits and assets to help develop relevant technical standards and protocols.¹⁰ HSBC has now completed three proof-of-concept use cases within the Project Ensemble sandbox.¹¹ These included a purchase of digital bonds that had been issued on HSBC Orion, the bank’s platform for asset tokenisation; an interbank transfer of tokenised deposits between HSBC and Hang Seng Bank; and settlement of electronic bills of lading using tokenised deposits and Ensemble’s interoperability platform, working together with Ant Digital Technologies and GSBN, a blockchain platform.

• Cross-border payments: Digital currencies can facilitate faster, cheaper, and more secure cross-border transactions. As well as supporting Project mBridge, HSBC is advancing real-world applications through the Monetary Authority of Singapore’s Project Guardian, which pilots digitally native issuance of structured products, and digital issuance of variable capital company (VCC) funds for asset servicing.¹²
• Access to financial services: The digitalisation of the financial system has the potential to improve financial access for unbanked and underbanked communities, and enable new business models and revenue streams that broaden access to financial products and investments to more people. The success of India’s nationwide electronic payments network underscores this potential: the number of bank accounts in India jumped from 400 million in 2014 to more than 1.4 billion in 2023.¹³
• Transparency and security: Blockchain and distributed ledger technology can be used to improve the identifiability and traceability of digital transactions. Ensuring robust consumer protections for fintech is a global priority.¹⁴ HSBC is at the cutting edge of digital and crypto fraud detection and prevention measures and works hand-in-hand with clients to ensure robust protection protocols are in place across digital platforms.¹⁵

The introduction of digital currencies will require new financial infrastructure to integrate these instruments with the global financial system, and many questions are yet to be answered around the compatibility and interoperability of different digital protocols.

HSBC is working to solve these challenges, including through proof-of-concept initiatives in the US and the UK, exploring the feasibility of the Regulated Liability Network – a hypothetical financial market infrastructure model that records, transfers and settles central bank money, commercial bank money and electronic money on the same chain.¹⁶

HSBC has also developed a digital assets platform, HSBC Orion, to support the issuance of digital bonds and tokenised assets. In February 2024, HSBC helped the Hong Kong Monetary Authority issue a HKD6 billion-equivalent green bond across four currencies (HKD, CNH, USD, EUR). This was the largest digital bond issuance globally, as well as the first multi-currency digital bond issuance.¹⁷

Digital currencies are an evolving area, subject to licensing from local regulators, with many elements of design and regulation yet to become clear. While the path to widespread adoption remains uncertain, Asia’s leadership in this area promises to create a range of opportunities for businesses to reduce frictions and improve efficiencies in their finances. We look forward to supporting continued innovation in this area.