As central banks around the world, including the People's Bank of China and the Hong Kong Monetary Authority, increase their use of FinTech and explore the use of Central Bank Digital Currencies, talent development strategies need to closely track developments to prepare skilled professionals who will shape the increasingly tech-driven financial future.
For Henri Arslanian, Partner and PwC Global Crypto Leader, there is little doubt that Central Bank Digital Currencies (CBDC) and other types of digital currencies are not only poised to drastically alter the centuries-old financial infrastructure, they will determine the future of money. "We have arrived at a pivotal moment, not only for the future of finance, but also the future of money," says Arslanian whose book, The Future of Finance: The Impact of FinTech, AI and Crypto on Financial Services, has been ranked as one of Amazon’s global top 10 best-sellers in financial services. Like other changes that have a major impact on financial markets and institutions, Arslanian says there will be winners and losers, but now is the right time for Hong Kong to grasp the opportunities.
While still in its relative infancy with just a few countries including the Bahamas and St. Kitts and Nevis having deployed a version of CBDC, many other countries around the world are showing interest in developing and pilot testing CBDC systems and strategies, including the Hong Kong Monetary Authority (HKMA), Hong Kong's de facto central banking authority. According to a global survey conducted by the Bank of International Settlements (BIS) in 2020, more than 80% of central banks are exploring the use of digital currencies. About 14% have actually launched a proof of concept pilot programme or are in the development stage with the most advanced CBDC projects in the retail sector.
According to Arslanian, when it comes to making CBDC headway, having been working on digital currency development since 2014, Mainland China is leading the world by a considerable margin. In 2020, the People's Bank of China (PBoC) began pilot testing its Digital Currency Electronic Payment (DCEP) in Shenzhen, Suzhou, Chengdu and Xiongan giving the digital yuan the same legal status as the physical yuan. "China’s accomplishments with its digital currency are pushing central banks around the world to create their own digital currencies," Arslanian notes.
Similarities and differences
While CBDCs and cryptocurrencies both rely on Distributed Ledger Technology (DLT), there are significant differences between them. For instance, while cryptocurrencies such as Bitcoin have become an increasingly established part of the financial landscape, the cryptocurrency is privately issued and not backed by assets or regulated by governments. In some cases this has given rise to concerns about cryptocurrencies’ volatility and credibility as stable currencies. CBDCs on the other hand are issued by a country’s central bank and backed by reserves, which are essentially digital versions of traditional fiat currencies—digital dollars, pounds, euro, yen or renminbi, for example. They are also subject to regulation. However, as cash is transformed into strings of ones and zeroes, CBDC is not without its risks, such as heightened cybersecurity and data privacy risks. By their nature, digital currency transactions can be tracked from capital investment to consumer spending to commodity speculation. "These are issues that will need to be resolved," says Arslanian.
Strengthening Hong Kong's advantages through talent development
As a University of Hong Kong (HKU) adjunct associate professor credited with teaching the first FinTech university course in Asia, and with more than 500,000 LinkedIn followers, Arslanian believes it is vital for Hong Kong to educate and empower the next generation of FinTech and digital currency professionals. "It is our moral duty to empower the next generation who will be most impacted by the changes and opportunities," he says. From an intellectual and professional perspective, accountants, lawyers and professionals in the financial community need to update their skills to stay current with digital currency trends and developments. "There are plenty of potential clients looking for services." Outlining its plans to accelerate FinTech and digital currency development in Hong Kong, in its recently unveiled "Fintech 2025", roadmap, the HKMA announced it would strengthen its research work to increase Hong Kong’s readiness in issuing CBDCs at both wholesale and retail levels. Meanwhile, to increase the supply of FinTech talent, the HKMA aims to collaborate with various strategic partners to groom all-round talent, including both students and practitioners, through various initiatives including developing FinTech-specific training programmes and qualifications, as well as promoting joint projects between industry and academia. An example of such initiatives is the Industry Project Masters Network (IPMN) scheme. Scheduled to launch in September 2021, the IPMN scheme will provide internship opportunities to postgraduate students to work on banks’ FinTech projects on and other artificial intelligence technologies.
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