Report: Programmable central bank digital currency will bring profound changes to financial services for small and medium-sized enterprises

On May 29th, Standard Chartered and PwC China jointly released a white paper titled "Central Bank Digital Currency (CBDC) Jointly Creating a Future Banking Ecosystem", proposing that central bank digital currencies are suitable for starting from relatively low complexity retail scenarios. Once successful, it may bring great benefits to participants, especially small and medium-sized enterprises. If it is to be further applied in the fields of trade and supply chain finance, significant changes need to be made in technology and international cooperation. The above application scenarios will be built on the design and operation of smart contracts, data management and sharing mechanisms, interoperability between central bank digital currencies and other payment ecosystems, and local and cross-border regulatory support.

The report points out that the Guangdong Hong Kong Macao Greater Bay Area has the conditions of "one country, two systems, three tariff zones, and three currencies", and has close economic exchanges within the area. It is very suitable to test the innovative application of central bank digital currency in this area, especially for innovation with international development potential.

In terms of the application of retail customer loyalty programs, the white paper believes that programmable central bank digital currency can help break the point barriers of traditional consumption patterns in different industries and locations, awaken massive "sleeping" points, achieve "universal exchange" of points for various types of clothing, food, housing, and transportation, especially in cross-border scenarios, and promote the increase of consumption frequency and vitality.

Li Feng, Vice President and General Manager of Personal, Private, and Small and Medium sized Enterprise Banking Department of Standard Chartered China, stated that a highly trustworthy and transparent central bank digital currency and its programmable features can more effectively connect the fragmented information sources in the current industry value chain, thereby driving more open cooperation and innovation, and helping the financial system more efficiently serve the needs of the real economy. Research shows that application scenarios based on programmable central bank digital currencies will bring profound changes to future financial services for individuals and small and medium-sized enterprises.

The report suggests that using programmable central bank digital currencies to promote trade and supply chain transactions can also achieve similar benefits. In terms of obtaining traditional financing services, many small and medium-sized suppliers find it difficult to obtain financing due to their small scale or lack of collateral and credit records; Supply chain finance solutions often face the problem of how to achieve standard docking and interoperability in cross industry and cross-border processes. By combining trade and payment information, central bank digital currency can be programmed according to relevant payment rules and terms, and become a new trade financing tool, helping commercial banks, core enterprises (buyers), and small and medium-sized deep suppliers to complete credit penetration and fund flow more safely and efficiently.

In addition, the white paper believes that appropriate governance models for smart contracts and data sharing can support the wider application of central bank digital currencies in business environments. Li Delin, partner of PwC China Digital Consulting, stated that strengthening cooperation between cross-border industry institutions and regulatory agencies is crucial for verifying the use cases of central bank digital currencies and establishing a programmable banking ecosystem that unleashes the potential of central bank digital currencies.

Editor Xu Chao

Proofread by Liu Baoqing